What is it?
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The BoE has announced a new lending facility for larger businesses who do not qualify for CBILS (businesses with annual turnover in excess of £45 million). The scheme will be run by the BoE on behalf of the Treasury.
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The idea is to provide short-term working capital for companies which are fundamentally strong, but have been affected by a short-term funding squeeze, enabling them to continue financing their short-term liabilities.
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It is intended CCFF will be a temporary measure and the closing date will be dependent on the economic outlook.
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Businesses will need to liaise with their bank to create commercial paper which will then be used in the application process to the BoE (further details in right hand column).
Eligibility
- Eligible businesses will be those that make a “material contribution” to the UK economy.
- In practice, firms that meet this requirement would normally be UK incorporated companies, including those with foreign-incorporated parents with a genuine business in the UK; companies with significant employment in the UK; firms with their headquarters in the UK.
- Firm must be able to demonstrate they were in “sound financial health” prior to the shock.
- The clearest way to demonstrate sound financial health is to have, or acquire, a credit rating. For such firms, investment grade means a short-term rating of A3/P3/F3 or above, a long-term rating above BBB-/Baa3/BBB- by at least one of the major credit agencies (S&P, Moody’s or Fitch).
- If you do not have an existing credit rating from the major credit agencies, one potential route to evidencing credit status is for your firm or your bank to get in touch with one of the major credit agencies to seek an assessment of credit quality that can be shared with the BoE and the Treasury. Forms of acceptable credit ratings can be found here.
- The restrictions that apply to CLBILS loans in respect of share buyback, dividends and executive pay will also apply to CCFF participants that wish to borrow money that will be repaid beyond 19 May 2021.
How can you apply?
- In order to access CCFF, you will need to liaise with your bank. The commercial paper will have the following characteristics:
- maturity of one week to twelve months
- where available, a credit rating of A-3 / P-3 / F-3 from at least one of Standard & Poor’s, Moody’s and Fitch as at 1 March 2020
Commercial paper is an unsecured, short-term debt instrument issued by a company
- A full list of participating providers can be found here.
- Once you have spoken to your finance provider, if you are unsure whether you are eligible, contact the BoE at CCFFeligibleissuers@bankofengland.co.uk
- If, after speaking with your bank, you believe you are eligible then you will need to complete the following documents (all on the BoE website):
- Issuer Eligibility Form (XLS)
- Issuer Undertaking and Confidentiality Agreement
- If your commercial paper will be issued by an entity other than the primary entity in your group, then you may also need a guarantee
- Associated legal opinion from the primary entity in your group.