The Federal Reserve made several modifications and clarifications to the the Term ABS Loan Facility's (TALF) terms and conditions.
The changes establish a process to review rating agency eligibility for the TALF program, clarify certain monitoring functions related to eligible borrowers, and limit certain TALF related distributions.
The New York Federal Reserve plans to announce the list of TALF-eligible rating agencies for the February 2010 non-mortgage-backed ABS subscription shortly after it has completed its review of the submissions and notified each of the applicable credit rating agencies regarding its eligibility.
Since TALF was established, the New York Fed has accepted credit ratings from three credit rating agencies — Stadard & Poor's, Moody’s Investors Service and Fitch Ratings.
Bank of America Merrill Lynch analysts said it’s likely that DBRS will look to become an eligible rating agency for the non-CMBS TALF program. DBRS is already approved for the CMBS TALF program.
The New York Fed also reiterated that a TALF borrower is expected to have a mechanism for continuously monitoring its direct and indirect investors as well as any of its investment managers as long as the TALF loan is outstanding.
Furthermore, if any entity’s direct or indirect ownership interest in the borrower or an investment manager of the borrower reaches the material investor threshold, the borrower must escalate such material investor to its TALF agent for due diligence review.
The NY Fed has also extended by one day the period of time in which monthly disbursements of principal and interest on underlying collateral shall be distributed under the terms of existing TALF loans.
The payment date for monthly principal and interest disbursements in respect of all TALF loans shall be the second business day following each determination date.
For ABS with a redemption option exercisable below par, the market value used to determine the maximum TALF loan amount will be capped at 105%t of par value.