Sector developments and company hires

Return of the TALF
The US Fed announced a slew of new measures to support the credit markets this morning, including the revival of the Term Asset-Backed Securities Loan Facility (TALF), first seen in the wake of the global financial crisis. Under the TALF, the New York Fed will commit to lend to an SPV on a recourse basis and the US Treasury Department will make an equity investment of US$10bn.

The TALF SPV initially will make up to US$100bn of loans available. The loans will have a term of three years; will be non-recourse to the borrower; and will be fully secured by eligible ABS. All US companies that own eligible collateral and maintain an account relationship with a primary dealer are eligible to borrow under the TALF.

Eligible collateral includes US dollar-denominated cash ABS that have a credit rating in the highest long-term or the highest short-term investment-grade rating category from at least two eligible ratings agencies and do not have a credit rating below the highest investment-grade rating category from an eligible agency. All or substantially all of the credit exposures underlying eligible ABS must have been originated by a US company and the ABS must be issued on or after today, 23 March 2020.

In addition, to be eligible, the ABS must have underlying credit exposures that are: auto loans and leases; student loans; credit card receivables (both consumer and corporate); equipment loans; floorplan loans; insurance premium finance loans; certain small business loans that are guaranteed by the Small Business Administration; or eligible servicing advance receivables. Eligible collateral will not include ABS that bear interest payments that step up or step down to predetermined levels on specific dates. In addition, the underlying credit exposures of eligible collateral must not include exposures that are themselves cash ABS or synthetic ABS.

To be eligible collateral, all or substantially all of the underlying credit exposures must be newly issued. The feasibility of adding other asset classes to the facility will be considered in the future, the Fed notes.

The Fed’s other measures today involved increasing the amount of Treasuries and agency MBS the FOMC can purchase, now including agency CMBS, and expanding its recently announced CPFF (SCI 17 March) and MMLF (SCI 19 March) facilities to include municipalities. At the same time, it has established two new programmes to support liquidity in the primary and secondary corporate bond markets.

CBILS guarantee launched
The British Business Bank has launched the Coronavirus Business Interruption Loan Scheme (CBILS), which provides facilities of up to £5m for smaller businesses across the UK that are experiencing lost or deferred revenues, leading to disruptions to their cashflow. Delivered via over 40 accredited lenders and partners, CBILS provides lenders with a government-backed partial (80%) guarantee against the outstanding facility balance, subject to an overall cap per lender. The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years. There is no fee for SMEs to access the scheme.

Dollar rolls increased
The US FHFA has authorised Fannie Mae and Freddie Mac to enter into additional dollar roll transactions, with the aim of providing increased liquidity to MBS investors. Eligible collateral is limited to agency MBS and the transactions must be undertaken via an auction or similar mechanism to ensure that they occur at a fair market price.

North America
Mehtap Cevher Conti has joined Hogan Lovells in New York as a partner in the firm’s finance practice. With more than 15 years of experience in aviation finance, she joins Hogan Lovells from Arnold & Porter Kay Scholer. Cevher Conti advises banks, export credit agencies, aircraft lessors and airlines on a broad range of transactions for airlines and corporate lessors.