Chapter 7. Funding, Credit, Liquidity, and Loan Facilities

70.01 General

In response to the COVID-19 pandemic, the Federal Reserve created a number of facilities to support the economy during the downturn. The following sections provide information on the background and accounts of each facility program.

70.10 Commercial Paper Funding Facility (145-060, 145-065, and 145-070)

In March 2020, the Federal Reserve reestablished the Commercial Paper Funding Facility under the name of CP Funding Facility II LLC (CPFF II). The Federal Reserve Board authorized the FRBNY under section 13(3) of the Federal Reserve Act to provide financing to the CPFF II. The FRBNY is the sole beneficiary of the CPFF II and its assets and liabilities are consolidated for financial reporting purposes with those of the FRBNY. The primary asset accounts of the CPFF II, which were reactivated from the previously closed 2009 CPFF, are described below. The assets purchased by the CPFF II are designated as held-to-maturity under Accounting Standard Codification (ASC), Investments—Debt and Equity Securities. The commercial paper will be recorded at amortized cost in accordance with ASC 820, Fair Value Measurement.

145-060
CPFF assets, face
145-065
CPFF assets, discount/premiums
145-070
CPFF other investments
 

70.20 Term Asset-Backed Securities Loan Facility (145-400, 145-415, 145-430, 145-445, 145-460, 145-515, 145-530, 145-560, and 145-575)

In March 2020, the Federal Reserve Board announced a program to support the credit needs of consumers and businesses by facilitating the issuance of asset-backed securities (ABS) and improving the market conditions for ABS more generally. Under the TALF II LLC, the FRBNY provides loans to eligible issuers of ABS. The loans purchased by the TALF II are not designated as held for sale and therefore are held for investment under FASB ASC Topic 310, Receivables. The loans will be recorded at the cost basis. The FRBNY is the primary beneficiary of the TALF II, and its assets and liabilities are consolidated for financial reporting purposes with those of the FRBNY. The primary asset accounts related to the loan facility and the TALF II are described below.

145-400
TALF—loans extended to borrowers
145-415
TALF—ABS held by FRBNY at FV
145-430
TALF—assets, discounts
145-445
TALF—other investments
145-460
TALF—assets, face
145-475
TALF—accrued interest payable—FRBNY
145-515
TALF—FV adjustment to ABS held by LLC
145-530
TALF—interest receivable
145-575
TALF—FV adjustment of loans
 

70.30 Paycheck Protection Program Liquidity Facility

In April 2020, the Federal Reserve Board announced an emergency lending program to facilitate lending to small businesses. The Paycheck Protection Program Lending Facility (PPPLF) bolstered the Small Business Administration's (SBA) Paycheck Protection Program (PPP Loans) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Under the PPPLF, the Federal Reserve Banks will lend to eligible borrowers on a non-recourse basis, taking PPP loans as collateral. The covered PPP loans are fully guaranteed as to principal and accrued interest by the SBA, the amount of each being determined at the time the guarantee is exercised. However, these loans still must be evaluated for collectability on at least a quarterly basis. Per ASC Topic 860, Transfers and Servicing, the borrower's pledge of collateral will, therefore, be accounted for as a collateral-secured loan by both the borrower and the Reserve Banks.

70.40 Corporate Credit Facilities

In March 2020, the Corporate Credit Facility (CCF LLC) was established, including two facilities programs that would support credit to large investment-grade U.S. companies – the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF). The FRBNY will lend to a special purpose vehicle (SPV) through which the CCF LLC, both the PMCCF and the SMCCF, will operate. The FRBNY is the primary beneficiary of the CCF, and its assets and liabilities are consolidated for financial reporting purposes with those of the FRBNY. The fair value option was elected for the valuation of exchange-traded funds (ETFs) held in the SPV portfolio, and any changes in market value will go directly to earnings, eliminating a need for periodic impairment evaluation. In addition, the investment account assets will be valued using the fair value option and recognized in the income statement in accordance with ASC 820, Fair Value Measurement. All other assets held in the SPV are classified as held to maturity, recorded at amortized cost, and evaluated for impairment in accordance with ASC 320, Investments—Debt and Equity Securities.

70.41 Corporate Credit Facilities—Primary Market Corporate Credit Facility (145-630, 145-631, and 145-632)

The PMCCF provides a funding backstop for corporate debt to eligible issuers so that they are better able to maintain business operations and capacity.

145-630
Initial Investments—PMCCF
145-631
Investments Discounts—PMCCF
145-632
Other Investments—PMCCF
 

70.42 Corporate Credit Facilities—Secondary Market Corporate Credit Facility (145-645, 145-646, and 145-647)

The SMCCF supports market liquidity by purchasing individual corporate bonds of eligible issuers and exchange-traded funds (ETFs) in the secondary market.

145-645
Initial Investments—SMCCF
145-646
Investments Discounts & Premiums—SMCCF
145-647
Other Investments—SMCCF
 

70.50 Main Street Lending Program

In April 2020, the Main Street Lending Program (Program) was established to support lending to small and medium-sized businesses under the CARES Act. The Program will operate through five facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), the Main Street Expanded Loan Facility (MSELF), the Nonprofit Organization New Loan Facility (NONLF), and the Nonprofit Organization Expanded Loan Facility (NOELF). The Federal Reserve authorized the FRBB under section 13(3) of the Federal Reserve Act to lend to MS Facilities LLC (an SPV) through which these facilities will operate. The FRBB is the primary beneficiary of this SPV, and its assets and liabilities are consolidated for financial reporting purposes into the FRBB. Loan participations purchased under each of the five facilities described below are recorded at the cost of purchase and treated as loans under ASC 310, Receivables.

70.51 Main Street Lending Program—Main Street New Loan Facility (145-660 and 145-662)

The Main Street New Loan Facility (MSNLF) was set up to enhance support for small and medium-sized businesses through the provision of credit. The availability of additional credit is intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain their operations and payroll until conditions normalize. Eligible lenders extend new five-year term loans to eligible borrowers ranging in size from $100,000 to $35 million. The maximum size of a loan made in connection with the MSNLF cannot, when added to the eligible borrower's existing outstanding and undrawn available debt, exceed four times the eligible borrower's adjusted 2019 earnings before interest, taxes, depreciation, and amortization (EBITDA). Certain primary asset accounts related to the loan facility are listed below.

145-660
Loan Participation—MSNLF
145-662
Investments—MSNLF
 

70.52 Main Street Lending Program—Main Street Expanded Loan Facility (145-675 and 145-677)

The Main Street Expanded Loan Facility (MSELF) is intended to facilitate lending to small and medium-sized businesses through the provision of credit. The availability of additional credit is intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain their operations and payroll until conditions normalize. Eligible lenders increase an eligible borrower's existing term loan or revolving credit facility. The upsized tranche is a five-year term loan ranging in size from $10 million to $300 million. Certain primary asset accounts related to the loan facility are listed below.

145-675
Loan Participation—MSELF
145-677
Investments—MSELF
 

70.53 Main Street Lending Program—Main Street Priority Loan Facility (145-678 and 145-680)

The Main Street Priority Loan Facility (MSPLF) is intended to enhance support for small and medium-sized businesses through the provision of credit. The availability of additional credit is intended to help companies that were in sound financial condition prior to the onset of the COVID-19 pandemic maintain their operations and payroll until conditions normalize. Eligible lenders extend new five-year term loans to eligible borrowers ranging in size from $100,000 to $50 million. The maximum size of a loan made in connection with the MSPLF cannot, when added to the eligible borrower's existing outstanding and undrawn available debt, exceed six times the eligible borrower's adjusted 2019 EBITDA. Certain primary asset accounts related to the loan facility are listed below.

145-678
Loan Participation—MSPLF
145-680
Investments—MSPLF
 

70.54 Main Street Lending Program—Nonprofit Organization New Loan Facility (145-681 and 145-683)

The Nonprofit Organization New Loan Facility (NONLF) is designed to provide support to small and medium-sized nonprofit organizations and their employees across the United States during the current period of financial strain by supporting the provision of credit to such organizations. Eligible lenders extend new five-year term loans to eligible borrowers ranging in size from $100,000 to $35 million. The maximum size of a loan made in connection with the NONLF cannot exceed the eligible borrower's average 2019 quarterly revenue. Certain primary asset accounts related to the loan facility are listed below.

145-681
Loan Participation—NONLF
145-683
Investments—NONLF
 

70.55 Main Street Lending Program—Nonprofit Organization Expanded Loan Facility (145-684 and 145-686)

The Nonprofit Organization Expanded Loan Facility (NOELF) is designed to provide support to small and medium-sized nonprofit organizations and their employees across the United States during the current period of financial strain by supporting the provision of credit to such organizations. The NOELF was designed to meet the needs of borrowers with existing loan arrangements, particularly those with larger and more complex existing loans, where pre-existing loan documentation can be used. Eligible lenders increase an eligible borrower's existing term loan or revolving credit facility. The upsized tranche is a five-year term loan ranging in size from $10 million to $300 million. Certain primary asset accounts related to the loan facility are listed below.

145-684
Loan Participation—NOELF
145-686
Investments—NOELF
 

70.60 Municipal Liquidity Facility (145-700, 145-701, and 145-702)

In April 2020, the Federal Reserve established the Municipal Liquidity Facility (MLF). The Federal Reserve authorized the FRBNY under section 13(3) of the Federal Reserve Act to lend to a SPV through which the MLF will operate. The FRBNY is the primary beneficiary of the MLF, and its assets and liabilities are consolidated for financial reporting purposes with those of the FRBNY. The assets purchased by the SPV are designated as held-to-maturity under ASC 320, Investments—Debt and Equity Securities. The municipal notes will be recorded at amortized cost in accordance with ASC 820, Fair Value Measurement, subject to analysis for other-than-temporary-impairment. Cash generated from facility fees may be invested in assets that are valued at fair value.

145-700
Investments at Par—MLF
145-701
Investments Discounts & Premiums—MLF
145-702
Other Investments—MLF
 

70.70 Money Market Mutual Fund Liquidity Facility

In March 2020, the Money Market Mutual Fund Liquidity Facility (MMLF) was established under section 13(3) of the Federal Reserve Act to provide liquidity to Money Market Mutual Funds. The FRBB was authorized to lend to eligible borrowers, taking as collateral certain types of assets purchased by the borrower from Money Market Mutual Funds. Each advance shall be in a principal amount equal to the value of the collateral pledged to secure the advance. The collateral valuation will either be the seller's amortized cost or the fair value. For asset-backed commercial paper, unsecured commercial paper and U.S. municipal short-term debt, the valuation will be the seller's amortized cost. The FRBB records such advances made under the MMLF at its purchase cost and treats as loans under ASC 310, Receivables.

70.80 Primary Dealer Credit Facility

In March 2020, the Primary Dealer Credit Facility (PDCF) was established as a program to support the credit needs of American households and businesses. The PDCF is intended to allow primary dealers of the FRBNY to support smooth market functioning and facilitate the availability of credit to businesses and households. The PDCF is established under Section 13(3) of the Federal Reserve Act, with approval. Under the facility, the PDCF will offer overnight and term funding with maturities up to 90 days.

70.90 U.S. Treasury Equity Contribution/Deposit (240-475)

The U.S. Treasury has made preferred equity investments in each of the credit facilities operated through LLCs through the Exchange Stabilization Fund (ESF). For the MMLF, the U.S. Treasury has provided a credit protection deposit through the ESF. The U.S. Treasury is using the ESF as a backstop to cover any losses the Federal Reserve may incur through lending programs. The preferred equity / deposit contribution for each facility is recorded within the account below.

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Last Update: January 22, 2021