On December 19, 2008, the Federal Reserve Board released revised terms and conditions and questions and answers concerning its proposed Term Asset-Backed Securities Loan Facility (TALF).  Under the TALF, the Federal Reserve Bank of New York (New York Fed) will make up to $200 billion dollars of loans to eligible borrowers, which will include all U.S. companies.  TALF loans will be secured by eligible collateral, consisting of U.S. dollar-denominated cash asset-backed securities (ABS), which, among other things, must have long-term credit ratings in the highest investment grade category.  The TALF is intended to make credit available to consumers and small businesses on more favorable terms by facilitating the issuance of ABS and improving market conditions for ABS more generally.

Additional details for the TALF announced by the Federal Reserve include:

  • The term of TALF loans has been extended from one year to three years.

  • The ABS pledged to secure TALF loans must be issued on or after January 1, 2009.

  • Auto loans backing eligible ABS must have been originated on or after October 1, 2007; the underlying loans may include retail loans and leases relating to cars, light trucks, or motorcycles, as well as auto dealer floorplan loans.

  • Student loans backing eligible ABS must have been first disbursed on or after May 1, 2007; the underlying loans may include federally guaranteed student loans, including consolidation loans, as well as private loans.

  • Eligible credit card ABS must be issued to refinance existing credit card ABS maturing in 2009 and must be issued in amounts no greater than the amount of the maturing ABS; the underlying receivables may be consumer or corporate credit card receivables.

  • Interest rates on TALF loans may be fixed or floating, at the option of the borrower.  Interest rates will be determined by the New York Fed in advance of each monthly allocation of TALF loans.  Floating rate loans will be based on the London Interbank Offered Rate (LIBOR) plus a spread.  The New York Fed will target interest rates to be higher than those available in normal market conditions, but lower than those available in current illiquid markets.

  • TALF loans will be allocated to eligible borrowers with eligible collateral, rather than being distributed by auction.

  • TALF loans will have a minimum size of $10,000,000 and may be prepaid at the option of the borrower.

In making its announcement, the Federal Reserve indicated that it is continuing to consult with ABS issuers, investors, and dealers with respect to the terms and conditions of the TALF.  The program is expected to be operational in February 2009. 

The current term sheet and frequently asked questions for the TALF are available on the New York Fed website.

If you have any questions concerning the TALF please contact any of the following attorneys:

John L. Culhane, Jr., Banking and Consumer Financial Services
Dominic J. De Simone, Practice Leader, Commercial Real Estate Recovery
Joseph A. Fanone, Public Finance Department
Thomas A. Hauser, Business and Finance Department
Alan S. Kaplinsky, Banking and Consumer Financial Services
Justin P. Klein, Business and Finance Department
Vincent J. Marriott III, Bankruptcy, Reorganization and Capital Recovery Group
Mary J. Mullany, Business and Finance Department
Brian M. Pinheiro, Employee Benefits and Executive Compensation Group

Prior TALF Alerts

November 26, 2008
Federal Reserve and Treasury Announce Two New Programs To Boost Credit Availability

Prior EESA Alerts

December 12, 2008
Treasury Department Issues Closing Documents for Private Financial Institutions to Participate in the Capital Purchase Program

December 1, 2008
SEC Staff Issues Sample Guidance to CPP Participants Filing Proxy Statements

November 26, 2008
Federal Reserve and Treasury Announce Two New Programs To Boost Credit Availability

November 18, 2008
Treasury Department Issues Term Sheet and Announces December 8, 2008 Deadline for Private Financial Institutions To Participate in the Capital Purchase Program

November 14, 2008
Kashkari Details Future TARP Deployment Strategy

November 12, 2008
Treasury Secretary Details TARP Strategy 

November 7, 2008
Treasury Department Announces Solicitation Regarding Asset Management Services in Connection with EESA Capital Purchase Program 

November 6, 2008

Beware: Is There a "Trojan Horse" in the Capital Purchase Program Securities Purchase Agreement?

October 23, 2008
Kashkari Testifies Before Senate Banking Committee 

October 14, 2008
Treasury, Federal Reserve, and FDIC Joint Statement Capital Purchase Program

October 13, 2008
Remarks on TARP to Institute of International Bankers

October 7, 2008
Emergency Economic Stabilization Act of 2008/TARP

October 6, 2008
Employee Benefits and Executive Compensation Issues Connected to Emergency Economic Stabilization Act of 2008 

October 6, 2008
Emergency Economic Stabilization Act of 2008 

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