Banking and Finance Law Daily Fed expands population thresholds for MLF eligibility
Tuesday, April 28, 2020

Fed expands population thresholds for MLF eligibility

By Stephanie K. Mann, J.D.

In addition to state governments, counties with more than 500,000 residents and cities of more than 250,000 residents are now eligible for up to $500 billion in additional lending.

The Federal Reserve Board is expanding the scope and duration of the Municipal Liquidity Facility (MLF). Originally announced on April 9 as part of an initiative to provide up to $2.3 trillion in loans to support U.S. households, businesses, and communities (see Banking and Finance Law Daily, April 9, 2020), the MLF is now set to offer up to $500 billion in lending to states, counties with a population of at least 500,000 residents, and U.S. cities with a population of at least 250,000 residents to help manage cash-flow stresses caused by the coronavirus pandemic. The expanded population thresholds will allow more entities to borrow directly from the MLF.

To be eligible for the facility, notes must mature no later than 36 months from the date of issuance—an increase from the previously announced 24-month maximum term. In addition, among other rating requirements, eligible issuers must have had an investment grade rating as of April 8, 2020, from at least two major nationally recognized statistical rating organizations. The termination date for the facility has been extended to Dec. 31, 2020, in order to provide eligible issuers more time and flexibility.

The Fed is also considering expanding the MLF to allow a limited number of governmental entities that issue bonds backed by their own revenue to participate directly in the MLF as eligible issuers. Any decision to include any such additional eligible issuers would be publicly announced at a future date. Before determining whether additional measures are needed, the Fed will monitor conditions in primary and secondary markets for municipal securities.

The Fed has also released a Frequently Asked Questions sheet and an appendix to provide additional guidance.

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