This article was originally published 8 February, 2009
On February 6, 2009, the Federal Reserve Board released additional terms and conditions, including preliminary loan rates and collateral haircuts, relating to its previously announced Term Asset-Backed Securities Loan Facility ("TALF"). Under the TALF, the Federal Reserve Bank of New York ("FRBNY") will make up to $200 billion of non-recourse loans available to eligible borrowers to enable them to purchase certain asset-backed securities ("ABS"). Hedge funds, private equity funds, mutual funds and other investment vehicles may borrow under the TALF so long as they satisfy the eligibility requirements. A forthcoming Master Loan and Security Agreement ("MLSA") will provide further details on the terms applicable to TALF borrowings. The initial TALF subscription and loan settlement dates are expected to be announced later this month, contingent on the completion of work necessary to make the TALF operational. The TALF will cease making new loans on December 31, 2009 unless it is extended by the Federal Reserve Board. Below is a summary of the TALF and certain related federal income tax considerations. Text in italics signifies material additions to, or changes from, the terms of the TALF announced by the Federal Reserve Board in December 2008.
Eligible Borrowers
All U.S. companies that own eligible collateral may participate in the TALF. An entity is a "U.S. company" for purposes of the TALF if it is:
- a business entity or institution that is organized under the laws of the United States or a political subdivision or territory thereof (U.S.-organized) and conducts significant operations or activities in the United States, even if it has a parent company that is not U.S.-organized;
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- Note that any U.S.-organized subsidiary of an entity described above is also a "U.S. company" for purposes of the TALF;
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