On Wednesday, June 17, 2020 New York Governor Andrew Cuomo announced that New York City, the Mid-Hudson Region, and Long Island are all expected to move forward an additional level under the State’s reopening plan within the next week. Currently, New York City is in Phase One, and the Mid-Hudson and Long Island are in Phase Two.

Per the Governor, New York City will advance to Phase Two on Monday, June 22, 2020. So far, dates the Governor has publicly stated for advancing any region have held true, but Mayor Bill de Blasio has been more cautious on this point, believing that the City would not meet the criteria for Phase Two until July 1 at the earliest. Under Phase Two, the following industries may reopen: (1) professional services and offices ; (2) in-store retail ; (3) retail rental, repair, and cleaning; (4) real estate services; (5) vehicle sales, rentals, and leasing ; (6) hair salons and barbershops; (7) commercial building management; and (8) outdoor and take-out food services.

Mid-Hudson is expected to advance to Phase Three on Tuesday, June 23, 2020, with Long Island to follow on June 24, 2020. Under Phase Three, the following businesses may reopen: (1) personal care services, such as tattoo parlors, massage therapy, spas, tanning, and waxing; and (2) indoor food services that meet the proper distancing guidelines.

 


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

The Federal Reserve recently expanded its Main Street Lending Program (the “Program”) to three separate loan facilities:  the Main Street New Loan Facility, the Main Street Priority Loan Facility and the Main Street Expanded Loan Facility (each, a “MSLP Facility” and collectively, the “MSLP Facilities”).  The MSLP Facilities are aimed at providing up to $600 billion of additional liquidity to eligible mid-sized business enterprises. Unless extended, the Program is set to expire on September 30, 2020.

The following is a high-level summary of certain terms relating to the Program and each MSLP Facility as described in the Frequently Asked Questions (“FAQs”) issued by the Federal Reserve and Department of Treasury in connection with the Program.  The FAQs are applicable to any eligible secured or unsecured term loan originated after April 24, 2020.

  1. Eligible Borrower. To be eligible under a MSLP Facility, a business must meet the following criteria:
    • The business must be in existence before March 13, 2020.
    • The business must not be in an “Ineligible Business” as described in the Small Business Association’s regulations concerning PPP loans.
    • The business must have 15,000 or fewer employees, or have 2019 annual revenues of $5 billion or less.
    • The business must be a U.S. business.
    • The business can only participate in one MSLP Facility, but may receive more than one loan under the same facility so long as the amount of all loans under such facility does not exceed the maximum loan amount.
    • The business must not have received specific support pursuant to the CARES Act.
    • The business must be able to make all of the required certifications.
  2. Loan Amount. Pursuant to the term sheets issued for each MSLP Facility, the minimum and maximum loan amount varies by MSLP Facility as follows:
    • Main Street New Loan Facility:
      • Minimum Loan Amount: $250,000
      • Maximum Loan Amount: The lesser of (i) $35 million, or (ii) an amount that, when aggregated with an eligible borrower’s existing outstanding and undrawn available debt, does not exceed 4 times such eligible borrower’s adjusted EBITDA for fiscal year 2019.
    • Main Street Priority Loan Facility:
      • Minimum Loan Amount: $250,000
      • Maximum Loan Amount: The lesser of (i) $50 million, or (ii) an amount that, when aggregated with an eligible borrower’s existing outstanding and undrawn available debt, does not exceed 6 times such eligible borrower’s adjusted EBITDA for fiscal year 2019.
    • Main Street Expanded Loan Facility:
      • Minimum Loan Amount: $10,000,000
      • Maximum Loan Amount: The lesser of (i) $300 million, or (ii) an amount that, when aggregated with an eligible borrower’s existing outstanding and undrawn available debt, does not exceed 6 times such eligible borrower’s adjusted EBITDA for fiscal year 2019.
  1. PPP Loan. A business that received a PPP loan remains eligible to receive a loan under a MSLP Facility.
  2. Loan Term. With respect to each MSLP Facility, each eligible loan will have a maturity date of 5 years. This was increased from 4 years as originally proposed.
  3. Interest Rate. A loan under any MSLP Facility shall have an interest rate of Libor (1 month or 3 month) plus 300 basis points.
  4. Repayment Deferral. Principal payments due with respect to each MSLP Facility may be deferred for two years, and interest payments deferred for one year. Commencing in year three of the loan term, payments of principal and accrued interest shall be due and payable as follows: 15% at the end of year 3, 15% at the end of year four and a balloon payment of 70% upon maturity. Any loan under a MSLP Facility is full recourse to the applicable borrower and is not forgivable.
  5. Collateral/Priority.
    • A loan under any of the MSFL Facilities may be secured or unsecured. However, if the underlying loan is secured, a loan under the Main Street Expanded Loan Facility must also be secured.
    • A loan under the Main Street New Loan Facility may not be contractually subordinated in terms of priority to the borrower’s other loans or debt instruments (which means that it may not be junior in priority in bankruptcy). Under both the Main Street Priority Loan Facility and the Main Street Expanded Loan Facility the loan must be senior or pari passu with, in terms of priority and security, the borrower’s other loans or debt instruments, other than mortgage debt.
  6. Reserve Bank Participation. With respect to all MSLP Facilities, the Federal Reserve Bank of Boston (as the designated Reserve Bank), through a single common special purpose vehicle, will purchase 95% participation interests in eligible loans from eligible lenders. Eligible lenders will retain 5% of the risk associated with any new loans or upsize of existing facilities made to eligible businesses..
  7. Required Certifications. Eligible borrowers are required to make the following certifications and covenants in connection with any MSLP Facility:
    • Eligible borrowers must refrain from repaying the principal balance of, or any interest accrued on, any existing indebtedness until the Program loan is repaid in full, unless such principal or interest payment is mandatory and due (i.e., no voluntary prepayments). The foregoing does not prevent an eligible borrower from refinancing existing debt owed by such borrower to a non-Program lender upon origination of any eligible MSLP Facility.
    • Eligible borrowers covenant not to seek to cancel or otherwise reduce any committed line of credit advanced by a Program lender or otherwise.
    • Each eligible borrower must certify that it has a reasonable basis to believe that, as of the loan origination date and after giving effect to the same, that such borrower has the ability to meet its financial obligations for at least 90 days therefrom, and does not expect to file for bankruptcy during such time period.
    • Each eligible borrower covenants that it will comply with all compensation, stock repurchase and capital distribution restrictions that apply to direct loan programs under the CARES Act, provided that an S corporation or other pass-through entity is permitted to make distributions to the extent reasonably required to cover its owner’s tax obligations in respect of such entity’s earnings.
    • Each eligible borrower must certify that it is eligible to participate in the applicable MSLP Facility, including in light of the conflicts of interest prohibitions contained in the CARES Act.
    • Each eligible borrower covenants and agrees to use commercially reasonable efforts to maintain its payroll levels and retain its employees during the term of the eligible loan.

In addition to the foregoing certifications, each eligible borrower is also required to demonstrate that it is unable to secure adequate credit accommodations from other banking intuitions outside of the Program. Per the FAQs, an acceptable basis for such certification may be that the amount, price or terms of other credit accommodations available to borrower are inadequate for such borrower’s needs during the current unusual and exigent circumstances.

In connection with the above, the Federal Reserve has released a form of borrower certifications and covenants for each MSLP Facility, each of which are linked here: Main Street New Loan Facility, Main Street Priority Loan Facility and Main Street Expanded Loan Facility.

  1. Documentation. Required forms and agreements can be found on the Reserve Bank’s website, which includes a Program loan participation agreement, form of borrower and lender certifications, servicing agreements and related documentation. While the Federal Reserve is not providing form loan documents for use in connection with the MSLP Facilities, all loan documents must include the terms and conditions detailed in the loan document checklist attached as Appendix A to the FAQs.

We are continuing to monitor as additional guidance is released by the Federal Reserve and/or the Department of Treasury, and will provide new Alerts as appropriate.  Our attorneys are available to answer any questions with respect to the foregoing.

 


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 (the “Act”), a bipartisan measure aimed at providing additional flexibility and extended relief to small business borrowers under the Paycheck Protection Program (“PPP”). Below is a summary of the key provisions of the Act, highlighting material deviations from those terms initially proposed under the CARES Act and subsequent guidance and regulations issued by the Small Business Administration (“SBA”) in consultation with the Department of Treasury (the “Treasury”).

  1. Extension of Maturity Date. The Act extends the maturity date for all PPP loans made on or after the effective date of the Act from 2 years to 5 years. The Act specifically provides that nothing contained in any previously enacted PPP legislation (including the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act) will prohibit lenders and borrowers from mutually agreeing to modify the maturity terms of any PPP loan in effect prior to the date of the Act in order to conform to the Act. Consistent with PPP guidelines, such provisions are applicable only to that portion of a PPP loan that remains outstanding after application of the forgiveness provisions of the PPP.
  2. Loan Forgiveness.

(a) Extension of Covered Period. As originally proposed, the forgiveness amount of any PPP loan was to be determined based on the total loan proceeds deployed to cover payroll costs and certain operational expenses over the 8-week period following disbursement of the loan, subject to adjustment. Subsequent SBA guidance contained in the Paycheck Protection Program Loan Forgiveness Application provided for an alternate covered period, commencing on the day of the first pay period following disbursement of PPP loan proceeds. The Act further extends such covered period to the earlier of (i) the date that is 24 weeks after the loan origination date, or (ii) December 31, 2020. Notwithstanding the foregoing, borrowers to which PPP loan proceeds have already been disbursed may elect to use the original 8-week period.

(b) Use of Proceeds. To be eligible for forgiveness under the PPP, the Act provides that borrowers must use at least 60% of the loan amount to fund payroll costs, reduced from the originally proposed 75%. and up to 40% of the loan proceeds (increased from 25%) may be used for eligible non-payroll expenses.

(c) Safe Harbor. The aggregate forgiveness amount remains subject to decrease in connection with any reduction in a borrower’s full-time equivalent employee headcount measured against the applicable reference period. However, the Act extends the existing safe harbor, such that borrowers will be eligible for the full forgiveness amount if such employee headcount is restored by December 31, 2020.

(d) New Exemptions. The Act incorporates the following new exemptions to the PPP forgiveness amount adjustment due to workforce reductions.

(i) Exemption Based on Employee Availability. During the period beginning on February 15, 2020 and ending on December 31, 2020, the aggregate forgiveness amount shall be determined without proportional adjustment for workforce reductions if an eligible borrower is able to document an inability to rehire individuals who were employees of borrower on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

(ii) Exemption Based on Business Operations. In addition to the above, the Act provides that the forgiveness amount will not be proportionately reduced due to workforce reductions if an eligible borrower is able document an inability to return to the same level of operating capacity as such business was able to sustain prior to February 15, 2020, due to compliance requirements or guidance issued by the Department of Health and Human Services, the Center for Disease Control and Prevention and/or the Occupational Safety and Health Administration, in each case between March 1, 2020 and December 31, 2020, related to maintenance of standards for sanitation, social distancing or any other worker or customer safety requirement in connection with COVID-19.

  1. PPP Loan Deferral Period. The Act extends the PPP loan repayment deferral period from 6 months to either (a) such date on which the forgiveness amount is remitted to lender, or (b) such date that is 10 months after the last day of the covered period, in the event that borrower fails to apply for forgiveness within such 10-month period.
  2. Payroll Tax Deferral. The Act revokes the initial prohibition imposed by the CARES Act with respect to a borrower’s deferral of payroll taxes. As a result, all borrowers are now eligible to defer payment of payroll taxes, regardless of whether all or any portion of such borrower’s PPP loan is ultimately forgiven.

We are continuing to monitor any developments, including supplemental guidance issued by the SBA and/or the Treasury. For additional information regarding the PPP and related federal guidelines, please reference our comprehensive Paycheck Protection Program Guide, linked here, which will be updated promptly to reflect the provisions of the Act.  Our attorneys are available to guide you and answer any questions regarding this Alert and our prior alerts, all of which can be found in our COVID-19 Resource Center.

 


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

As part of the phased opening of businesses in New Jersey limited outdoor restaurant food and beverage service is set to begin on June 15th. Operators should remember to obtain all necessary consent from their Landlord to permit the outdoor dining and such operations must still observe all state and local health and safety regulations and meet all social distancing and occupancy limitation requirements.

As for the service of alcoholic beverage in these outdoor areas. The NJ ABC is set to  roll out a new permit this week called a COVID-19 Expansion of Premises Permit. This permit would  allow current  licensees to expand their establishments, beginning on June 15, 2020, into outdoor areas contiguous and non-contiguous to their licensed premises. NJ Licensees should be on the lookout for the announcement on ABC’s website.  We are told to  expect the permit application to be available on the NJABC web site by Friday, 6/5.

For those with food and beverage operations based in NYC we are advised that NYC is supposedly voting this week on measures similar to that adopted by NJ. Once adopted we will have to see how three agencies – Dept of Transportation, Dept of Consumer Affairs and NY SLA coordinate to make this a quick and easy process so that outdoor food an beverage service can be readily provided by all Licensees.

 


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

On May 22, 2020, New York Governor Andrew Cuomo announced the launching of the New York Forward Loan Fund (NYFLF), a loan program providing relief for small businesses or non-profits located in New York State or small landlords with properties located in New York State which did not receive loans under the SBA’s Paycheck Protection Program or Economic Injury Disaster Loan program related to COVID-19. The NYFLF is an effort to help these businesses get back on their feet as they start to reopen.

The loans are available to certain businesses and non-profits with 20 or fewer full-time equivalent employees and landlords. Borrowers are required to have been in existence at least one year prior to the loan application and demonstrate direct economic hardship resulting from social distancing and stay at home orders related to COVID-19 that materially impacted their operations. The loan will bear interest (3% per annum for small businesses and landlords; 2% per annum for non-profits), and will be payable over a 5-year term (interest only for the first year, principal and interest over the balance of the term).  They can be prepaid at any time without penalty, and will be non-recourse (i.e. no collateral required). These loans are not forgivable (unlike the Paycheck Protection Program loans).  Proceeds may be used for working capital, inventory, marketing, refitting for social distancing guidelines, rent, supplies and other uses, but not refinancing of existing loans.

Small businesses can borrow up to the lesser of $100,000 or 100% of their average monthly revenues in any three-month period from 2019 or the first quarter of 2020, so long as they have gross revenues of less than $3 million per year.

Non-profits (must be 501(c)(3) or faith-based organization (but not to supporting religious worship or activities) can borrow up to the lesser of $100,000 or 100% of their average monthly expenses in any three-month period from 2019 or the first quarter of 2020, so long as they provide direct services to New Yorkers (e.g. daycare, legal aid, food banks, senior services, and the like), and have an annual operating budget of less than $3 million per year.

Small landlords can borrow up to the lesser of $100,000 or their projected reduction in three months’ net operating income based on actual reductions in NOI for April or May 2020, so long as they own no more than 200 units (and no single property greater than 50 units), properties are located in a low or moderate income census tract or meet a specified rent test and in good repair with no major violations, and the landlord has positive cash flow for a 12-month period prior to their loan request.  They must demonstrate that any mortgage is either subject to an active forbearance agreement, that they have not missed a debt service payment in the past 12 months and/or no active mortgage, and that they are current on their property taxes through March 2020.

Complete information is available on the NY Empire State Development website here.

Pre-applications will open on May 26, 2020, at noon Eastern time, will begin to be processed on June 1, 2020 based on industries and regions that have been opened, and are available here.

 


As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice.  For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.