The Bank of England (BoE) and UK finance ministry have published details of an update to the terms of the Covid Corporate Financing Facility (CCFF), which has over 230 businesses currently approved as eligible for access. The facility has supported £18.8bn of lending to 55 businesses and authorized a further £38.8bn of potential lending including to another 68 businesses that make a significant contribution to the UK economy. The CCFF will continue to allow businesses that can demonstrate that they were in sound financial health as of 1 March 2020 to borrow from the BoE by issuing short-term commercial paper.
The update announced today is the result of continued close cooperation between HM Treasury and the BoE. It aims to promote the ability of companies to repay their borrowings from the facility in an orderly way after the scheme closes to new drawings in March 2021.
The update has two main components:
- First, all businesses that wish to draw from the CCFF for a term extending beyond 19 May 2021 will be expected to provide a letter addressed to HM Treasury that commits to showing restraint on the payment of dividends and other capital distributions and on senior pay during the period in which their commercial paper is outstanding. These commitments are intended to create incentives for, and promote the ability of, businesses to repay their borrowings from the CCFF where they mature after the Facility is expected to close.
- Second, businesses that have drawn under the CCFF are now able to repay their drawings early if they choose to do so. This gives businesses greater flexibility to exit the Facility in an orderly way where they are able to access alternative sources of funding, for example in capital markets.
In addition, following detailed consideration, HM Treasury and the BoE have decided to publish the names of businesses that have drawn under the CCFF, as well as the amounts borrowed. This change will make the scheme more transparent and enable participating businesses to demonstrate their access to the scheme. These details will be published by the Bank every Thursday, beginning on 4 June at 15:00hrs (GMT).