COVID-19 Corporate Financing Facility

Includes details on the scheme for businesses in the UK.

COVID-19 Corporate Financing Facility

May 26th, 2020

The COVID-19 Corporate Financing Facility is part of a larger package of temporary measures designed to support UK public services, businesses, and people during the COVID-19 pandemic. This Facility is jointly offered by the HM Treasury and the Bank of England to support larger UK firms by buying short-term debt in the form of commercial paper.

What does the COVID-19 Corporate Financing Facility entail?

The COVID-19 Corporate Financing Facility (CCFF) is designed to provide larger firms and corporations with additional funding to help them with short-term cash flows that have been disrupted due to the social distancing and lockdown measures that are necessary during the COVID-19 (Coronavirus) pandemic. This Facility will be implemented by the Bank of England as the operating agent for the HM Treasury and will operate by purchasing short-term debt in the form of sterling dominated corporate paper of up to 1-year maturity.

It is hoped that the CCFF will help larger businesses across a range of sectors that make a material contribution to the UK economy to pay wages and their suppliers. Financing under the CCFF will be offered on terms that are comparable to what the market saw before the disruption caused by COVID-19 and will be open to those businesses that can prove they were financially sound before the outbreak.

Duration of the CCFF:

This scheme has been available for drawings since March 23, 2020, and will run for at least 12 months or for as long as it is needed to relieve cash flow pressures on firms that provide a material contribution to the UK economy. The Bank of England will issue a 6-month notice of the withdrawal of the CCFF.

Eligibility criteria:

  • Companies and their financial subsidiaries must make a financial contribution to the UK economy. This includes UK incorporated companies, companies with significant employment in the UK, and firms with their headquarters in the UK.
  • Companies must prove they were in sound financial health before the disruption caused by the COVID-19 pandemic.
  • Commercial paper must have a maturity of 1 week to 12 months, issued to the Bank of England via a dealer.
  • Companies need a short-term credit rating of A3/P3/F3/R3 or above or a long-term credit rating of BBB-/Baa3/BBB- or above from at least one of the major credit rating agencies, that is Standard & Poor's, Moody's, Fitch, and DBRS Morningstar.
  • Companies will still be eligible if they have been downgraded after March 1, 2020, to below the minimum credit ratings.
  • Securities issued by finance subsidiaries must be guaranteed by the parent company in a form that will be acceptable to the Bank of England.

Firms that do not have credit ratings can speak to their bank. The bank should then contact one of the major credit rating firms to do a credit assessment relating to participation in the CCFF. The Bank of England already has an agreement in place with the four major credit rating agencies dealing with suitable forms of credit assessment.

If you are unsure of your eligibility for the CCFF, you should discuss it with your bank first and then, if you are still unsure, with the Bank of England on CCFFeligibleissuers@bankofengland.co.uk.

Who will not be eligible for CCFF?

  • Companies with commercial paper issued by leveraged investment vehicles or by companies within groups that are predominately banks, investment banks, or building societies, publically owned entities, or financial sector entities that are regulated by the Bank of England or the Financial Conduct Authority.
  • Firms with different ratings from different firms with one of those ratings below the investment grade.
  • Companies with commercial paper that have non-standard features, such as extendibility or subordination, may not be eligible.

What is commercial paper?

Commercial paper is an unsecured short-term debt instrument that is issued by a company. In order to be eligible for purchase by the CCFF, commercial paper must have the following characteristics:

  • Be sterling dominated.
  • Have a maturity of 1 week to 12 months.
  • Have a credit rating of A3/P3/F3/R3 or above from at least one of Standard & Poor's, Moody's, Fitch, or DBRS Morningstar.
  • Have been issued directly into Euroclear and/or Clearstream.

Commercial paper with non-standard features, such as extendibility or subordination, will not be accepted by the CCFF. If your commercial paper is eligible for the scheme, your bank will assist you in issuing it to the Bank of England. The Bank of England will only purchase commercial paper from eligible dealers.

Businesses do not need to have issued commercial paper before using the CCFF. You can simply contact your bank. If your bank does not issue commercial paper, you can use the table below to find a bank that can assist you. There are also more details available on UK Finance.

Banks That Can Issue Commercial Paper:

Bank

Dealer Email Address

Dealer Contact Number

Barclays

steve.l.collins@barclays.com

+44 207 773 5757

HSBC

stephen.larkin@hsbc.com

+44 20 7991 1398

Lloyd's Banking Group

jethro.hancock@lloydsbanking.com

+44 20 7158 2064 / +44 7785 632 911

Natwest

jonathan.paxton@natwestmarkets.com

+44 207 085 3593 / +44 7769 161 518

Bank of America

gary.arndt@bofa.com

+44 20 7996 8904

Citi

david.hayes@citi.com

+44 207 986 9070

Goldman Sachs

luca.lombardi@gs.com

Not provided

JP Morgan

dan.singer@jpmorgan.com

Not provided

Morgan Stanley

Ciaran.o’flynn@morganstanley.com

Not provided

Standard Chartered

Annemarie.Ganatra@sc.com

+852 3983 8748

BNP Paribas

julien.tapin@bnpparibas.com

+33 1 43 16 97 34

Credit Suisse

Jonathan.eyles@credit-suisse.com

+44 207 888 9963

Process of claiming from the CCFF:

When applying to the CCFF, you should:

  • Confirm your eligibility for the CCFF with your bank or the Bank of England.
  • Complete the eligibility documents on the Bank of England's website.
  • Send the completed documents to CCFF-Applications@bankofengland.co.uk (or have your bank send them on your behalf).

The Bank of England's sterling dealing desk will accept purchase offers by phone Monday to Friday between 10:00 am and 11:00 am. The bank's dealers will confirm by return call as soon as possible whether the deal has been accepted, the cash amount, and the maturity date. The bank will also send an email confirmation for each transaction on the day of purchase.

If your business is confirmed as eligible before 16:00 on a working day, you will be able to sell your commercial paper via your bank to the Bank of England the next working day.

Pricing for Commercial Paper:

The CCFF will offer terms that are comparable to what the markets were offering before the disruption caused by the COVID-19 pandemic.

Primary market purchases will be at a spread above a reference rate, based on the current sterling overnight index swap (OIS) rate, to be determined at 09:45 on the day of the operation.

Secondary market purchases will be at the lower of amortized cost from the issue price given by the same method used for primary market purchases. A small additional fee will also be applied for use of the secondary facility.

Current Spreads as of March 23, 2020:

Rating

Spread to OIS

A1/P1

20 bps.

A2/P2

40 bps.

A3/P3

60 bps.

Limits for Offers Made by the CCFF:

The minimum size of an individual security from an individual participant that will be purchased is £1 million nominal. All offers should be rounded to the nearest £0.1 million nominal.

Maximum limits will depend on a number of factors, including the issuer's credit rating, and will undergo constant review. Issuers are also encouraged to disclose to the Bank of England the total amount they want to borrow.

HM Treasury's Maximum Pre-Approved Limits:

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.

Publications:

Companies participating in the CCFF will be required to sign a confidentiality agreement with the Bank of England and the names of issuers and securities purchased or eligible will not be made public.

However, every Thursday at 15:00 the Bank of England will publish the total aggregate amount paid to the sellers for commercial paper bought that week up until the previous day and the total aggregate amount of commercial paper bought to date, excluding the amount of commercial paper that has matured.

The first publication will be made on Thursday, April 2, 2020.

FAQs:

What is the COVID-19 Corporate Financing Facility?

The COVID-19 Corporate Financing Facility (CCFF) is a temporary relief measure designed to support larger UK-based firms by purchasing short-term debt in the form of sterling dominated corporate paper of up to 1-year maturity.

Who can use the COVID-19 Corporate Financing Facility?

Companies and their financial subsidiaries that make a financial contribution to the UK economy are eligible for the CCFF. This includes UK incorporated companies, companies with significant employment in the UK, and firms with their headquarters in the UK.

What is commercial paper?

Commercial paper is an unsecured short-term debt instrument that is issued by a company.

What characteristics does commercial paper need to be eligible for the CCFF?

  • Sterling dominated.
  • Maturity of 1 week to 12 months.
  • Credit rating of A3/P3/F3/R3 or above from at least one of Standard & Poor's, Moody's, Fitch, or DBRS Morningstar.
  • Issued directly into Euroclear and/or Clearstream.

When is a company considered to be in sound financial health?

Companies that have a short-term credit rating of A3/P3/F3/R3 or above, or a long-term credit rating of BBB-/Baa3/BBB- or above from at least one of the major credit rating agencies of Standard & Poor's, Moody's, Fitch, or DBRS Morningstar as of March 1, 2020, will be considered to be in sound financial health.

Can I apply for the CCFF if my company does not have a credit rating?

If your company does not have a credit rating, you should contact your bank and they can contact the Bank of England to discuss your company's investment grade and potential eligibility.

You can also contact one of the four major credit rating agencies (Standard & Poor's, Moody's, Fitch, or DBRS Morningstar) as ask for a credit quality assessment relating to your participation in the CCFF.

Do I need to have issued commercial paper before to particpate in the CCFF?

No. If you have not issued commercial paper before, you can simply contact your bank. If your bank does not issue commercial paper, you can find a bank that can assist you on UK Finance's website.

If I am eligible, can I sell commercial paper directly to the Bank of England?

No. The Bank of England will only purchase commercial paper from eligible dealers so companies can only participate in the CCFF through a bank.

Can I sell existing commercial paper?

The Bank of England will purchase new commercial paper in the primary market, but it is not clear from their website if they will purchase existing commercial paper in the secondary market. You can contact the Bank of England on CCFFeligibleissuers@bankofengland.co.uk to discuss your eligibility.

What will the pricing be for commercial paper issued under the CCFF?

The CCFF will offer terms that are comparable to what the markets were offering before the disruption caused by the COVID-19 pandemic.

Primary market purchases will be at a spread above a reference rate, based on the current sterling overnight index swap (OIS) rate, to be determined at 09:45 on the day of the operation.

Secondary market purchases will be at the lower of amortized cost from the issue price given by the same method used for primary market purchases. A small additional fee will also be applied for use of the secondary facility.

How long will the CCFF run?

The CCFF will be in operation from March 23, 2020, for at least 12 months or for as long as it is needed to relieve cash flow pressures on firms that provide a material contribution to the UK economy. The Bank of England will issue a 6-month notice of the withdrawal of the CCFF.

Can commercial paper be rolled over?

Yes. Commercial paper may be rolled over by issuing more eligible commercial paper to refinance the maturing commercial paper while the CCFF is operating. However, companies should carefully consider their ability to refinance the commercial paper when they eventually leave the CCFF scheme.

How much commercial paper can I sell to the Bank of England?

The minimum size of an individual security from an individual participant that will be purchased is £1 million nominal. All offers should be rounded to the nearest £0.1 million nominal.

Maximum limits will depend on a number of factors, including the issuer's credit rating, and will undergo constant review. Issuers are also encouraged to disclose to the Bank of England the total amount they want to borrow.

How do I apply for the Corporate Financing Facility?

  • Discuss your eligibility with your bank.
  • Complete the required documents that can be found on the Bank of England's website.
  • Send the completed documents to CCFF-Applications@bankofengland.co.uk, or have your bank send them on your behalf.
  • The Bank of England will confirm your eligibility as soon as possible.

Will the participants in the CCFF scheme be made public?

The names of participating issuers and securities purchased or eligible will not be made public. However, every Thursday at 15:00 the Bank of England will publish the total aggregate amount paid to the sellers for commercial paper bought that week up until the previous day and the total aggregate amount of commercial paper bought to date, excluding the amount of commercial paper that has matured.

How do I submit an offer to sell commercial paper?

Offers to sell commercial paper must be made by telephone to the Bank of England's sterling dealing desk between 10:00 am and 11:00 am (London time), Monday to Friday. The bank's dealers will confirm by return call as soon as possible whether the deal has been accepted, the cash amount, and the maturity date. The bank will also send an email confirmation for each transaction on the day of purchase.

If your business is confirmed as eligible before 16:00 on a working day, you will be able to sell your commercial paper via your bank to the Bank of England the next working day.

How will commercial papers be settled?

Purchases for commercial paper will normally be settled on a T+2 basis. The bank will send an email confirmation for each transaction on the day of purchase.

What other support options are available for UK businesses during the COVID-19 outbreak?

The UK government together with the banking sector have made a range of temporary financial aid measures available. Take a look at our guide on the resources available to UK businesses affected by COVID-19.