Municipal Liquidity Facility Application Now Available
On May 18, 2020, the Federal Reserve Bank of New York released a sample application and form documents and certifications with detailed information for potential issuers that wish to sell eligible notes to the Municipal Liquidity Facility (MLF). Once an issuer has determined its financial needs, a Notice of Interest must be filed indicating the offering type before an application is prepared.
The MLF special purpose vehicle will provide up to $500 billion in lending to state and local governments through the direct purchase of short-term notes. Eligible notes include tax anticipation notes, tax and revenue anticipation notes, bond anticipation notes and other short-term notes that mature no later than 36 months from issuance date. Proceeds can be used to help manage delayed cash flows from tax deadline extensions, revenue and tax reductions, COVID-19-related expenses or required principal and interest payments on government obligations.
The MLF is not a “first-come, first-served” program; there is no preference given to early filers. Each issuer has been allocated a certain maximum amount of available MLF Funds (see Eligible Issuers List).
On April 27, 2020, the Federal Reserve (Fed) released a revised term sheet expanding the MLF’s scope and duration and issued a FAQ document (see More Details on $500 Billion Municipal Liquidity Facility). On May 11, 2020, the Fed updated the FAQ and added new details on sales process, pricing and disclosure requirements (see Pricing & Disclosure Details Released on $500 Billion Municipal Liquidity Facility).
Program details are subject to further refinements by the Fed and Treasury. The Fed will continue to closely monitor conditions in the primary and secondary markets for municipal securities and will evaluate whether additional measures are needed to support the flow of credit and liquidity to state and local governments.
BKD will continue to follow this developing situation. As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. Visit BKD’s COVID-19 Resource Center to learn more. If you have questions, contact your BKD Trusted Advisor™ today.