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April 17, 2020

Term Asset-Backed Securities Loan Facility

Coronavirus: Financial Services Advisory

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On March 23, 2020, the Board of Governors of the Federal Reserve System (the Federal Reserve) announced that it will establish the Term Asset-Backed Securities Loan Facility (TALF II), as part of a package of initiatives to mitigate the disruptive effect of the coronavirus pandemic on the US economy. TALF II is a credit facility, authorized under section 13(3) of the Federal Reserve Act, through which the Federal Reserve Bank of New York (the Reserve Bank) will commit to lend to a special purpose vehicle (SPV), on a recourse basis, against certain types of asset-backed securities (ABS) that satisfy specified eligibility criteria.

The SPV initially will make up to $100 billion of loans available. The US Department of the Treasury (the US Treasury), using the Exchange Stabilization Fund, will make a $10 billion equity investment in the SPV, and the remaining $90 billion will come from the proceeds of recourse loans from the Reserve Bank.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.