12 Oct 2020
On Friday HM Treasury and the Bank of England announced some important changes to the Covid Corporate Financing Facility (CCFF) that apply with immediate effect. The details of the changes are set out in the Bank of England’s updated ‘questions and answers on the CCFF’ page of its website. In particular:
This announcement follows earlier announcements that seek to limit use of the CCFF. These include: (1) the Bank of England’s confirmation on 22 September that CCFF will close for new issuance with effect from 23 March 2021 and will also close to new applications from counterparties and issuers looking to become eligible on 31 December 2020; and (2) as discussed in our earlier briefing, the Bank of England’s notice on 19 May that issuers that wish to draw from the CCFF for a term extending beyond 19 March 2021 must provide a “restraint letter” to HM Treasury, committing to suspend the payment of dividends and other capital distributions and “pay restraint for company management” during the period their commercial paper is outstanding, and that from 4 June 2020 the Bank of England will publish weekly the names of CCFF issuers with commercial paper outstanding and the quantity of commercial paper each issuer has outstanding with the CCFF.
According to data published by the Bank of England, since peak usage in April and May in the immediate aftermath of lockdown, CCFF usage has significantly reduced in recent weeks and months, both in terms of weekly usage and in terms of the total stock of CP outstanding. The Bank of England also indicates that the pipeline of new applications to the CCFF has tailed off. This is not surprising: the public debt capital markets have been open in the normal way for several months and investment grade issuers are therefore typically able to access funds using conventional capital raising processes. For issuers still active in the capital markets, the CCFF has therefore already served its purpose and it is therefore no surprise that the Government continues to wind it down. For those issuers that are not able to access the capital markets so easily (either because their funding needs are lower than a minimum benchmark capital markets issuance or because they are not investment grade) the CCFF may still be a welcome alternative.
This material is provided for general information only. It does not constitute legal or other professional advice.
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