April 1, 2020
Authored by: Jason Werner, Vicki Westerhaus and R. Randall Wang
As discussed in BCLP’s recent client alert, the CARES Act provides broad relief to a cross section of the country. Title IV, focused on economic stabilization, has particular relevance to public and other larger companies. We highlight some of the noteworthy requirements below.
Conditions of Loans and Loan Guarantees. As discussed in our alert, the Treasury Department is authorized to make loans, loan guarantees and other investments in eligible businesses where credit is not otherwise reasonably available, including: air carriers, ticket agents and aircraft services companies; cargo airlines; and “businesses critical to maintaining national security,” .
Federal Reserve Programs. Additional funds will be available to Treasury to make loans and loan guarantees to, and other investments in, programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, States or municipalities. Eligible businesses must be organized and conduct significant operations, and have a majority of their employees, in the U.S. The Act directs Treasury to seek implantation of a program to finance lenders to make direct loans, to the extent practicable, to mid-sized companies (including many nonprofits) with between 500 and 10,000 employees, with interest no higher than 2% per annum and no payment obligation during the initial months.
Selected Conditions. Under both the Treasury and Federal Reserve programs, until one year after any loan is repaid:
- No Stock Repurchases. The company (and, under the Treasury program, its