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Food Venture Financing News - Weekly Issue No. 14

06.23.20
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In This Issue:

New Updated and "EZ" PPP Forgiveness Applications

Last week, the SBA unveiled a revised, borrower-friendly Paycheck Protection Program (PPP) loan forgiveness application (application here) implementing the PPP Flexibility Act of 2020. The SBA also published a new "EZ" version of the forgiveness application (application here) that requires fewer calculations and less documentation for eligible borrowers that:

  • Are self-employed and have no employees; OR
  • Did not reduce the salaries or wages of their employees by more than 25 percent, and did not reduce the number or hours of their employees; OR
  • Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25 percent. 

Federal Reserve Announces Disclosure of "Large" PPP Borrowers

Reacting to bipartisan pressure, the Federal Reserve announced that the SBA will disclose the name and key information (including addresses, demographic data, number of jobs supported and other details) of borrowers who received PPP loans of $150,000 or more. Specific loan amounts will not be disclosed, but borrowers will be grouped in five tranches ranging from $150,000 to $10 million. For loans of less than $150,000 (which comprise approximately 86 percent of the number of PPP loans but only 27 percent of the aggregate value of PPP loans), the SBA will provide summary information broken down by ZIP Code, industry, business type and various demographic categories.

Main Street Lending Program

The Federal Reserve has opened lender registration for the Main Street Lending Program ("MSLP"), and the program should be fully operational shortly. Early reports are that the response (both from lenders and potential borrowers) has been relatively tepid. Current terms for new loans include:

  • Minimum Loan Size: $250,000
  • Maximum Loan Size: The lesser of (i) $35M, (ii) or an amount that when added to borrower's outstanding and undrawn available debt does not exceed 4x adjusted EBITDA
  • Loan Term: 5 years
  • Principal Deferral: 2 years (interest deferral is 1 year)
  • Repayment: 15 percent in year 3; 15 percent in year 4; and 70 percent in year 5
  • Interest Rate: LIBOR + 3 percent

FAQs on the MSLP can be found here: FAQs, and Borrower certifications and covenants can be found here.

COVID-19 Bankruptcy "Tidal Wave"

  • Many companies have so far managed to avoid bankruptcy by drawing down lines of credits, furloughing workers, delaying projects, and taking advantage of federal and state pandemic-relief programs.
  • Bankruptcy filings are likely to soar when these programs expire, according to Robert J. Keach, a director of the American College of Bankruptcy, who expects "a COVID-19 cliff" in the next 30 to 60 days.
  • Large food delivery businesses are seeing a surge in consumer demand. GrubHub announced acquisition plans and DoorDash announced $400 million in new equity financing.
  • Beyond Meat is moving closer to meat price parity with traditional meat products, which will likely widen the consumer base for alternative protein products.
  • CPG companies are expressing support for Black communities and the Black Lives Matters movement.
  • Certain ingredients—such as mushrooms, carbon dioxide, and yeast—are in short supply in the current COVID-19 environment.
  • DWT is closing Series A deals for early stage CPG food and beverage investments that are well-positioned for ongoing and post-COVID-19 market realities.

Articles

At Davis Wright Tremaine LLP (DWT), we are proud to have one of the largest Food & Beverage legal practices in the country, with over 40 attorneys representing food innovators, entrepreneurs, and investors at every level of the food chain, from Farm to Label.

Please contact our Food and Beverage team if we can assist you in any way in these unprecedented times.

The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.

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