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New York Federal Reserve Releases FAQ on Primary and Secondary Market Corporate Credit Facilities and Seller Certification Packet for Secondary Facility

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On May 4, 2020, the Federal Reserve Bank of New York (“the Fed”) released Frequently Asked Questions (“FAQ”) regarding the previously announced Primary Market Corporate Credit Facility (“PMCCF”) and the Secondary Market Corporate Credit Facility (“SMCCF”). The PMCCF is intended to allow eligible companies access to credit so they are better able to maintain business operations and capacity during the period of dislocation related to the pandemic. The SMCCF is intended to support market liquidity by purchasing individual corporate bonds of eligible issuers and exchange-traded funds (“ETFs”) in the secondary market.

On May 5, 2020, the Fed released the certification packet required to be completed by eligible sellers for participation in the SMCCF. The certifications cover solvency, status as a U.S. business and absence of conflicts of interest under the CARES Act.  The Fed will begin to accept completed certification packets after 12:00 p.m. ET on May 6, 2020 and will contact the seller via email to confirm receipt prior to making any purchases under the program. According to the FAQ, the SMCCF is expected to begin purchasing eligible ETFs in early May 2020. The PMCCF program and eligible corporate bond repurchases under the SMCCF are expected to become operational soon thereafter.

Key Highlights of the FAQ

  • Explanation of information relating to SMCCF/PMCCF transactions that will be publicly disclosed;
  • Identification of acceptable nationally recognized statistical rating organizations;
  • CARES Act or other government programs/support that may not be combined with participation in the SMCCF/PMCCF;
  • Eligibility requirements related to U.S. operations, U.S. employees, and non-U.S. parents;
  • Eligibility requirements of target assets;
  • Certification requirements, including inability to secure adequate credit accommodations from other sources and solvency;
  • Details regarding calculation of the limits of the SMCCF/PMCCF; and
  • Details regarding pricing of loans and bonds purchased under the SMCCF/PMCCF.

The FAQ indicates that additional details on the timing of the facilities, issuer certification requirements and other operational details will be made available in the near future.

The FAQ can be found here and the Seller Certification Packet for the SMCCF can be found here.

V&E is carefully monitoring these developments, and we will be providing updates as more information becomes available.

Please visit our Coronavirus: Preparation & Response series for additional resources we hope will be helpful.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.