April 10, 2020

On March 23, the Federal Reserve announced the creation of the Term Asset-Backed Securities Loan Facility, or TALF to support the asset-backed securities (ABS) market. The new facility (commonly referred to in the market as TALF 2.0) is based on the original TALF (TALF 1.0) that was created during the 2008/2009 financial crisis.  In each case the facility uses an “equity” investment from the U.S. Treasury in a Federal Reserve special purpose vehicle (SPV), along with leverage from the Federal Reserve, to make up to $100 billion of non-recourse three year loans secured by eligible ABS.  

The Federal Reserve released additional terms of the current TALF in a termsheet effective April 9, 2020, and indicated it would release additional terms and conditions further defining the program at a later date, with such terms being substantially based on those from TALF 1.0. The April 9 termsheet provides significant additional detail, particularly the description of loan terms and the inclusion of legacy commercial mortgage-backed securities (CMBS) and static leveraged loan collateralized loan obligations (CLOs) (subject to limitations discussed below) as eligible collateral. No launch date has been announced, and the April 9 termsheet specifies that no new credit extensions would be made after September 30, 2020 (unless extended). Below is the summary of the current TALF terms based on the material currently available.
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