The Bank of England has set out details of how the Covid Corporate Financing Facility (CCFF) will work for listed FTSE companies, which opened to new applications from 23 March
The Bank of England’s new lending facility for larger businesses – the Covid Corporate Financing Facility - will provide a quick and cost-effective way to raise working capital for larger businesses and opened for applications on 23 March.
By purchasing short-term corporate debt – known as commercial paper – the scheme provides a quick and cost-effective way to raise working capital for companies who are fundamentally strong but are experiencing severe disruption to cashflows, helping businesses across a range of sectors to pay wages and suppliers.
The scheme is open to businesses that can demonstrate that they were in sound financial health prior to the impact of coronavirus. Companies who wish to use the scheme do not need to have issued commercial paper before. Commercial paper is an unsecured, short-term debt instrument issued by a company.
The Covid Corporate Financing Facility will purchase sterling-denominated commercial paper, with the following characteristics:
- maturity of one week to 12 months;
- where available, a credit rating of A-3 / P-3 / F-3 / R3 from at least one of Standard & Poor’s, Moody’s, Fitch and DBRS Morningstar as at 1 March 2020; and
- issued directly into Euroclear and/or Clearstream.
It will not accept commercial paper with non-standard features such as extendibility or subordination, for example.
Companies - and their finance subsidiaries - that make a material contribution to the UK economy are able to participate in the facility and they must make arrangements to use the facility directly with their banks.
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Also today, in response to financial market conditions, the Bank of England has also activated the Contingent Term Repo Facility (CTRF), a temporary enhancement to its sterling liquidity insurance facilities.
Bank of England Governor, Andrew Bailey, said: ‘The Bank of England has taken a number of steps in recent weeks to support the UK economy through the economic shock caused by covid-19.
‘On Monday a new lending scheme, the Covid Corporate Financing Facility, will open to help businesses manage through this period of uncertainty. Combined with steps taken by the government, this will help companies through this difficult time and support the needs of the people of this country.
‘Further measures will be announced to ensure larger and medium sized businesses will be able to access the credit they need.’
The SME Coronavirus Business Interruption Loan Scheme also opened for applications on 23 March. Businesses need to talk to their current bank lenders about using the scheme, which is provided by the British Business Bank.
- For qualifying criteria and repayment terms, read Coronavirus Business Interruption Loan Scheme hiked to £5m published 20 Mar 2020
By Sara White
British Business Bank guidance: Coronavirus Business Interruption Loan Scheme (CBILS)
Bank of England guidance: Covid Corporate Finance Facility