All posts by DuaneMorris3

Expansion of Main Street Lending Program by Federal Reserve

On June 8, 2020, the Federal Reserve made significant additional changes to the terms of the Main Street Lending Program, aimed at making the program more attractive to small- and mid-sized businesses and to lenders. Changes include decreased minimum loan amounts, increased maximum loan sizes, extended loan terms and deferred principal repayments, among others.

To read the full text of this Duane Morris Alert, please visit the firm website.

Federal Reserve Updates Main Street Lending Program Guidance and Publishes Form Loan Documents

The Federal Reserve Board issued initial guidance regarding its Main Street Lending Program, as authorized under the Coronavirus Economic Stabilization Act (Title IV of the CARES Act), on April 9, 2020, which was modified and supplemented by the frequently asked questions (FAQs) published on April 30, 2020. On May 27, 2020, the Federal Reserve Bank of Boston, which the Federal Reserve System tasked with administering the Main Street Lending Program, released a further updated set of FAQs and published form documentation to assist with the documentation of each loan participation. The new guidance both modified and supplemented the previous guidance issued on the three facilities―the Main Street New Loan Facility, the Main Street Expanded Loan Facility and the Main Street Priority Loan Facility.

To read the full text of this Duane Morris Alert, please visit the firm website.

Federal Court Rules That Loans Are Not Securities

On May 22, 2020, the U.S. District Court for the Southern District of New York ruled in Kirschner v. J.P. Morgan. The court held that a syndicated term loan is not a “security” under state securities laws. Had the court found that loans are securities, such a ruling would have had profound consequences on the leveraged loan market.

To read the full text of this Duane Morris Alert, which provides a brief overview of the court’s holding and details the implications on the banking and financial services industry, please visit the firm website.

SBA Releases Interim Final Rule Regarding PPP – Lenders’ Perspective

On May 22, 2020, the United States Department of the Treasury and the U.S. Small Business Administration (SBA) released new guidance concerning the federal government’s Paycheck Protection Program (PPP) implemented under the CARES Act. The interim final rule sets forth responsibilities for both borrowers and lenders with respect to loan forgiveness review procedures and other matters. The interim final rule applies to all loans under the PPP, and, importantly, states that audits may be exercised in the SBA’s sole discretion, regardless of loan amount.

To read the full text of this Duane Morris Alert, please visit the firm website.

New Guidance Documents on Green Loan Principles and Sustainability Linked Loan Principles for a Post-COVID-19 World

While the world is currently focused on the impact of COVID-19 on the global economy, with “COVID-19 Bond” issuance easily outdistancing the current volume of green financing, it is time to consider post-COVID-19 activities. One positive effect of the pandemic is the demonstrable improvement of carbon levels and other environmental measures. So, as national governments consider measures to reopen their economies, lenders and borrowers may want to consider how best to finance the economies’ reemergence. Many hope to see an expansion in areas that stimulate growth in a more environmentally friendly manner.

To read the full text of this Duane Morris Alert, please visit the firm website.

 

New COVID-19 UK Government Financing Options Available

The UK government recently announced a package of measures to provide liquidity to UK businesses during the COVID-19 pandemic. Two schemes are particularly useful for financing needs: the HM Treasury and the Bank of England COVID-19 Corporate Financing Facility and the British Business Bank Coronavirus Business Interruption Loan Scheme.

To read the full text of this Duane Morris Alert, please visit the firm website.

CARES Act Impacts Banking and Finance Industry

The Coronavirus Aid, Relief and Economic Security (CARES) Act includes wide-ranging provisions that will have direct and indirect impacts on the banking and finance industry.

One positive effect of the pandemic is the demonstrable improvement of carbon levels and other environmental measures. So, as national governments consider measures to reopen their economies, lenders and borrowers may want to consider how best to finance the economies’ reemergence. Many hope to see an expansion in areas that stimulate growth in a more environmentally friendly manner.

To read the full text of this Duane Morris Alert, please visit the firm website.

 

Federal Banking Regulators Take Steps to Allow Financial Services for Hemp-Related Businesses

Banking has been an impediment for the cannabis industry because the Bank Secrecy Act of 1970 (BSA) and related regulations―which seek to prevent money laundering and other financial crimes―place onerous requirements on banks when a transaction is suspected to involve illegal activity. 12 C.F.R. Section 21.11. Notwithstanding billions of state-legal cannabis dollars exchanging hands, the commercial banking industry, which is largely federally regulated, is virtually nonexistent in the cannabis space. In 2014, the Treasury’s Financial Crimes Enforcement Network (FinCEN) provided guidance intended to enhance the banking of cannabis-related monies by establishing a category of suspicious activity reporting for “marijuana related businesses.” But, according to FinCEN, as of June 30, 2019, just 553 commercial banks and 162 credit unions had filed an SAR for a “marijuana-related business.”

View the full Alert on the Duane Morris LLP website.

Unitranche Facilities – Continued Growth in an Uncertain Market: Part II

By Frederick D. Hyman

In an earlier post, I generally discussed the structure of unitranche facilities and their growth in popularity among borrowers since the credit crisis. Of course, this explosive growth has occurred in a relatively benign economic environment. As a result, the inherent limitations of the structure have not been tested by a downturn or, in turn, by bankruptcy courts. Lenders exploring the market must do so with some caution and a fulsome understanding of the rights of, and limitations on, “first out” lenders in a distressed scenario.

By their nature, unitranche debt does not easily allow senior lenders to silence junior lenders in times of distress based on collateral valuation alone because all the borrower’s obligations are secured by a single lien. Instead, protections must be carefully drafted into the AAL. These protections will include, for e.g., waivers of the ability of “last out” lenders to vote in favor of a contradictory plan of reorganization, restrictions on their rights to object to asset sales, and limitations on the rights of such lenders to provide post-petition financing. Similar provisions contained in first lien/second lien intercreditor agreements have been deemed enforceable “subordination provisions” in the context of a bankruptcy. The same should generally hold true for AALs. If an intercreditor dispute arises in the context of a borrower’s bankruptcy, lenders should be mindful that a bankruptcy court might decline to accept jurisdiction (particularly if the borrower is not a party to the AAL), leaving an unrelated state or federal court to address the matter. Continue reading Unitranche Facilities – Continued Growth in an Uncertain Market: Part II