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New Federal Reserve Programs Announced to Assist Business Owners

by Patrick Hayes and Mahek Bhojani The Federal Reserve announced several new lending programs to add an additional $2.3 trillion to support the U.S. economy which has been severely affected by the COVID-19 pandemic. Below is a broad overview of the new programs:

The Main Street Lending Program will enhance support for small and mid-sized businesses that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. Specific details of the Main Street Lending Program loan that have been released are as follows:

Principal and interest payments will be deferred for one year.
Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses.
Banks will retain a 5 percent share, selling the remaining 95 percent to the Main Street program, which will purchase up to $600 billion of loans.
The minimum loan size will be $1 million; the maximum loan size will be the lesser of (i) $150 million, (ii) 30% of the Eligible Borrower’s existing outstanding and committed but undrawn bank debt, or (iii) an amount that, when added to the Eligible Borrower’s existing outstanding and committed but undrawn debt, does not exceed six times the Eligible Borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”).
Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers.
Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act. Specifically, per Section 4003(c)(3)(A)(ii) of the CARES Act, borrowers are prohibited from making dividend payments or other capital distributions for a period of 12 months after the loan is paid back. Furthermore, salaries above $425,000 will be frozen.
Firms that have taken advantage of the PPP may also take out Main Street loans.
Must be a business created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States.
Eligible Borrowers that participate in this program may not also participate in the Main Street New Loan Facility or the Primary Market Corporate Credit Facility.

The full term sheet released by the Federal Reserve for the Main Street Lending Program is available here. The Federal Reserve is seeking comments from borrowers, lenders, and other interested parties through April 16, 2020.

The aim of the Paycheck Protection Program Liquidity Fund (“PPPLF”) is to bolster the effectiveness of the Small Business Administration's Paycheck Protection Program (PPP) by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses. The PPPLF will extend credit to eligible financial institutions that originate Paycheck Protection Program loans, taking the loans as collateral at face value.

Specific details of the PPPLF are as follows:

All depository institutions that originate PPP Loans are eligible to borrow under this fund. The Board is working to expand eligibility to other lenders that originate PPP Loans in the near future.
Extensions of credit under this fund will be made at a rate of 35 basis points and without recourse to the borrower.
There are no fees associated with this fund.
PPP Loans pledged as collateral to secure extensions of credit under this fund will be valued at the principal amount of the PPP Loan.
The principal amount of an extension of credit under the fund will be equal to the principal amount of the PPP Loan pledged as collateral to secure the extension of credit.

The full term sheet released by the Federal Reserve for the Paycheck Protection Program Liquidity Fund is available here.

To read the full press release from the Federal Reserve, click here. We expect supplementary details of this program to be released and clarified in the near future. We will keep you updated. Click here for printable copy.

OSHA COVID-19 Updates

by Tony Stergio OSHA issued the following three updates:
Recordkeeping: OSHA announced on Friday that it will not require employers (outside Healthcare and Emergency Response organizations) to determine if an employee’s COVID-19 infection is work-related in most cases. OSHA will assume (outside Healthcare and Emergency Response) that a COVID-19 infection is not work-related and therefore not recordable unless:

There is objectionable evidence the infection is work related (such with a number of cases in employees who work closely together without an alternative explanation); and
The evidence was readily available to the employer (evidence employers get to employees or evidence the employer learned in the ordinary course).

Outside these exceptions, a COVID-19 infection would not be recordable. OSHA states it is implementing this guidance so that employers focus their response on enforcing good hygiene and otherwise minimizing COVID-19 spread.

General Duty Clause: If employers do not evoke adequate effort to keep employees safe from COVID-19 infections, however, they could be investigated and hit with General Duty Clause citations. OSHA launched such an investigation at an Amazon warehouse in Pennsylvania following a complaint that the company was not doing enough to prevent the spread of COVID-19. Such concerns included the employee’s inability to maintain social distancing, a lack of protective gear and not providing time to wash hands.

Fit Testing Requirements: Due to the shortage of N95 masks due to the COVID-19 Pandemic, OSHA has announced that its field offices will exercise enforcement discretion concerning annual mask Fit Testing Requirements as long as employers make good-faith efforts to comply with the requirements of the Respiratory Protection Standards.

OSHA advises that employers should assess their work practices, engineering and administrative controls, to identify changes that can be made to decrease the need for N95 and other face piece regulators. This could include increasing the use of wet methods, portable local exhaust systems and moving work outdoors. Click here for printable copy.

Celebrating 30 Years in 2020

Founded in 1990, with offices in Houston and Austin, Andrews Myers, Attorneys at Law, is a corporate law firm and recognized market leader in Texas construction law. The firm focuses on the concentrated disciplines of commercial litigation, construction, commercial real estate, corporate and business transactions, with additional emphasis on related issues including bankruptcy and insolvency, energy, employment and capital formation. A seasoned team of attorneys provides timely and cost-effective solutions to the most complex problems facing entrepreneurs and middle-market industry leaders throughout the state and the nation. For more information please visit www.andrewsmyers.com.