The disruptions in economic conditions caused by the coronavirus disease 2019 (COVID-19) are reaching the commercial paper and longer term debt capital markets. The Board of Governors of the Federal Reserve System (Federal Reserve) has already set into motion three separate facilities as part of its effort to facilitate credit and help alleviate collateral volatility that are expressly available to different participants in such. On March 17, 2020, the Federal Reserve reestablished a dealer credit facility last operated during the 2008 credit crisis. The Primary Dealer Credit Facility (“PDCF2020”) is a loan facility that provides credit to primary dealers, secured by certain highly rated fixed income collateral. The Commercial Paper Funding Facility also was reintroduced on March 17, 2020 (“CPFF2020”).
CPFF2020 mirrors the commercial paper funding facility commenced by the Federal Reserve in 2008 and is available to eligible ABCP issuers that apply for it and pay a facility fee. Issuers participating in the CPFF2020 will have direct access to the Federal Reserve for backstop purchases of their ABCP at predetermined rates irrespective of then current market conditions. On March 18, 2020, the Federal Reserve established a separate facility (the Money Market Mutual Fund Liquidity Facility, or “MMLF”) that is designed to provide liquidity to certain types of money market mutual funds (“MMFs”). MMLF is intended to support prime, state and municipal MMFs that experience significant stress in the event that investors seek to redeem their MMF shares for cash. MMLF provides for the Federal Reserve to make loans to eligible financial institutions that purchase certain eligible assets from MMFs.