The Federal Reserve Board ("FRB") revised the Municipal Liquidity Facility ("MLF") to expand the scope of eligibility and update rating requirements.
According to the FRB, the MLF will purchase up to $500 billion in short-term notes issued by U.S. states, cities and counties that meet certain population thresholds. By this action, FRB intends to improve liquidity in the wake of the COVID-19 pandemic. Under the expanded MLF, the FRB will (i) decrease the population thresholds so counties and cities with populations exceeding 500,000 residents and 250,000 residents, respectively, can borrow directly through the MLF; (ii) require eligible issuers to have had investment grade ratings from at least two "major nationally recognized statistical rating organizations" as of April 8, 2020; (iii) increase the maximum maturity of the purchased notes from 24 months to 36 months; and (iv) extend the MLF through December 31, 2020.
The FRB continues to consider further expansions to the MLF.
For further analysis, see Cadwalader's COVID-19 Update on the FRB Municipal Liquidity Facility.
Originally published April 28, 2020
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