On 17th March, HM treasury announced number of measures in order to support businesses from the disruption caused by COVID-19. One of the measures announced and specifically designed by UK government is coronavirus corporate financing facility. This measure is started by UK government to provide funding to businesses with the help of commercial paper.
- Coronavirus Corporate financing facility
- Eligibility criteria for coronavirus corporate financing facility
- Meaning of Commercial paper
- Issuers eligibility criteria for Coronavirus corporate financing facility
- Issuers not eligible for Coronavirus corporate financing facility
- Eligibility criteria for securities
- Documents required by bank for Coronavirus corporate financing facility
- Rating criteria for issuers
- Limit for maximum Drawings
- Availability of scheme & Purchase timings
- Procedure to apply for Coronavirus corporate financing facility
- Whether a company can access CCFF along with other UK government support schemes
Coronavirus corporate financing facility
Coronavirus corporate financing facility is a measure specifically designed by UK government in order to provide funding to eligible businesses by purchasing commercial paper having maturity up to 1 year. Commercial paper is issued by a firm in order to meet their short term debt obligations with fixed maturity. These funds are provided by UK government to help businesses in paying wages & suppliers as well as giving support to firms in cash flow disruptions. It is only applicable on those firms who were in sound financial health before the entry of COVID-19. This facility mainly covers the temporary impacts of COVID-19 on business balance sheets and cash flows on the basis of firm’s credit rating before COVID-19 and helps businesses to retain their presence in this difficult time of COVID-19. This scheme is valid for the period of at least 12 months and may continue longer, till the time steps are needed for revival of cash flow pressures. A Company can issue minimum £1 million of commercial paper to Bank of England under this facility. It can be issued in increments of £100,000.
Also See: Apply For The Coronavirus Future Fund
Eligibility criteria for coronavirus corporate financing facility
In order to get eligible for this facility, applicants need to meet the following eligibility criteria –
- Make a material contribution to UK economy
- No need of having previously issued commercial paper
- Must be investment grade or equivalent rated as on 1st March 2020
- Must not be a public undertaking except few exceptions
- Must not be PRA or FCA regulated
Commercial paper is an unsecured and short term debt instrument issued by a company in order to raise funds usually for a maturity period up to 1 year. It is basically issued by the companies to get instant cash to meet its short term obligations. You are not allowed to use previous issued commercial papers in order to participate in this facility.
Issuers eligibility criteria for Coronavirus corporate financing facility
The following issuers can issue commercial papers for participation in coronavirus corporate financing facility –
- Issuer must have an incorporated company in UK including companies having foreign incorporated parents.
- Companies must have their headquarters in UK.
- Companies with significant employment in UK.
- Housing associations fulfilling eligibility criteria are also eligible.
- Companies that are serving large customer base in UK.
- Companies having number of operating sites in UK.
- Companies that are generating significant revenues in UK.
Issuers not eligible for Coronavirus corporate financing facility
- Banks, Insurance companies, building societies and other financial sector entities governed by Bank of England or the financial conduct authority.
- Group companies that are largely active in businesses and are subjected to financial sector regulations.
- Leveraged investment vehicles.
- Public undertakings.
Eligibility criteria for securities
- Commercial paper should be issued in GBP sterling.
- It should have a maturity period of 1 week to 12 months.
- The commercial paper issued directly into Euroclear and/or Clearstream.
- It should not contain non-standard feature like subordination and extendibility.
- It must meet all the standards of ICMA and regulated by English law/courts.
- It should be issued at a minimum denomination of £1 million and integral multiples of£100,000.
- In case, commercial paper is issued by a finance subsidiary, it must have guarantee from a parent company and submitted in the form accepted by the bank.
Documents required by bank for Coronavirus corporate financing facility
Following documents are required by the bank from the companies who wish to access coronavirus corporate financing facility –
- Issuer eligibility form (As per applicability for primary or secondary market).
- Evidence of signing authority.
- Letter of confidentiality and undertaking.
- Full documentation for the commercial paper program.
- Issuer’s and its group recent annual report and accounts.
- Rating agency letter in respect of issuer and latest agency report.
- Issuer’s group organogram comprises of all main holding companies and subsidiaries.
Rating criteria for issuers
Before giving access to CCFF, a company is verified for sound financial health on the basis of ratings issued by credit rating agencies. The issuer’s rating criteria are as follows –
- As on 1st March 2020, you must have minimum short term credit rating of A-3/P-3/F-3/R-3 or a long term credit rating of BBB-/Baa3/BBB-/BBB(low) from any of the following credit rating agencies –
- DBRS Morningstar
- Commercial paper will not get eligible, if you have obtained different ratings from different agencies and one of your ratings is below the investment grade.
- In case any of the issuer is downgraded after 1st March 2020 and goes below the specified minimum rating criteria, it will still remain eligible for primary and secondary market purchase but with HMT approval.
Limit for Maximum drawings
There are limits specified to the maximum drawings for issuers by HM treasury for which the ratings chart is mentioned below –
|Rating||Initial issuer limit|
|A1/P1/F1/R1||Up to £1bn|
|A2/P2/F2/R2||Up to £600m|
|A3/P3/F3/R3||Up to £300m|
Availability of scheme & Purchase timings
This facility is available from March 23, 2020 to December 31, 2020. Daily purchases between 10:00 to 11:00
Procedure to apply for Coronavirus corporate financing facility
As an issuer, you need to follow the below mentioned procedure in order to get access to CCFF –
- Firstly, check whether your company is meeting the issuer eligibility criteria and rating criteria.
- Contact a bank as a dealer in order to participate in CCFF. You can also start the procedure of obtaining a rating from credit rating agency (if required).
- In case your company does not have an existing CP programme, your company can issue CP’s by establishing a CP program that meet the eligibility criteria of CCFF.
- Once you have established the CP programme, apply for CCFF facility and submit the documents to the bank.
- Banks verifies your eligibility criteria and asks you to sign an admission letter in order to confirm terms & conditions of CCFF. After receiving confirmation for eligibility, securities become eligible for sale.
Whether a company can access CCFF along with other UK government support schemes?
Companies and other entities can have access to all UK government support schemes but businesses are restricted to choose only one scheme from the following 4 schemes mentioned below –
- Coronavirus corporate financing facility
- Coronavirus business interruption loan scheme
- Coronavirus large business interruption loan scheme
- Coronavirus bounce back loan scheme
Irrespective of these 4 schemes, you are freely allowed to access other UK government schemes. For example – Coronavirus Job retention scheme
In case you want more information or advice on Coronavirus corporate financing facility, kindly call us on 03330886686 or you can also e-mail us at email@example.com
Also See: COVID-19 Mortgage Payment Holiday
Any questions? Schedule a call with one of our experts.