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Updated Guide to the 2020 Term Asset-Backed Securities Loan Facility (TALF) Program

June 10, 2020 (Updated September 3, 2020)

The new Term Asset-Backed Securities Loan Facility (TALF) program, which is intended to address the liquidity crisis caused by the coronavirus (COVID-19) global pandemic through non-recourse lending collateralized by issuances of eligible asset-backed securities (ABS), was created by the US Treasury Department and the Federal Reserve Bank of New York (the New York Fed). The purpose of the program is to encourage new consumer and small business lending by supporting issuance of eligible ABS.

The agencies have published updates and clarifications to the terms of TALF in the past several weeks. These include the following:

  • Eligible ABS that are not issued on the same day as the related loan settlement date must have been acquired in an arm’s length primary or secondary market transaction within 30 days prior to the relevant loan subscription date. For this purpose, the date of acquisition means the relevant pricing or trade date, and such acquisition must have settled prior to the related loan subscription date.
  • The TALF program termination date has been extended from September 30, 2020 to December 31, 2020.
  • New issue SBA ABS may be sold on a forward-settling basis. New issue SBA ABS will be treated as being issued and settled by the borrower on the loan settlement date with the proceeds of the TALF loan, so long as the borrower has entered into a commitment to purchase the SBA ABS on a trade date on or prior to the first date on which the SBA ABS have been issued and settled in DTC and within 45 days prior to the related loan subscription date (and so long as the delivery of the SBA ABS actually settles to the TALF SPV’s account on the TALF loan settlement date). In all cases, a trade date establishing a purchase price for a new issue SBA ABS must occur before the applicable loan subscription date.
  • The base value for newly issued collateral is the dollar purchase price on the applicable trade date. The base value for seasoned collateral remains as is (i.e., the least of (1) the dollar purchase price on the applicable trade date; (2) the market value as of the subscription date; and (3) a value based on the New York Fed’s review (or collateral review, in the case of CMBS)).

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the authors, Charles Sweet and Reed Auerbach, or any of the following Morgan Lewis lawyers:

Chicago
Patrick J. Lampe
Philip W. Russell
Jeffrey D. Weinstein

London
Lisa Cargill
Julian Goodman
Theresa D. Kradjian
Paul Matthews

New York
Reed D. Auerbach
Harlyn Bohensky
Matthew Joseph
Keith Krasney
Steve Levitan
Philip Russell
Edmond Seferi

Washington, DC
Asa Herald
Cory E. Barry
Jeffrey Johnson
Mark R. Riccardi
Paul R. St. Lawrence
Charles A. Sweet