On 9 October 2020, HM Treasury and the Bank announced an enhanced process to monitor and review CCFF issuers' credit quality in advance of the closure of the CCFF.
Credit quality review
To support orderly repayment by issuing companies the credit quality of issuers in the CCFF is reviewed on an ongoing basis.
Any issuer wanting to issue CP (either initial CP issuance or roll-overs of maturing CP) into the CCFF after 9 October will be subject to a review by HM Treasury to consider whether that issuance remains in line with the purpose of the facility.
Where an issuer wanting to issue CP into the CCFF has a current credit rating/equivalent that remains investment grade (that is, at or above a short-term rating of A3/P3/F3/R3 or equivalent, or a long-term rating of BBB-/Baaa3/BBB-/BBB low or equivalent), it can expect to be able to proceed to issue CP into the CCFF, subject to (i) providing supporting evidence as detailed below and (ii) the issuer’s approved drawing limit. The issuer should follow the process outlined below for notifying the Bank, with sufficient notice, of their intention to issue CP into the CCFF.
In cases where the credit rating/equivalent evidence of credit quality has fallen below levels deemed equivalent to investment grade (as defined in question B1), the issuer will have the option to pursue a review on which HM Treasury, as the ultimate risk-owner of the CCFF, will take the final decision. The review will consider whether the issuer’s use of the CCFF remains within the purpose of the facility. The review should be expected to take at least four weeks to complete, which may mean that issuance cannot take place on the issuer’s requested date. As part of this review, HM Treasury will request supporting information from issuers.
An update on drawing limits
In addition to the enhanced credit review process described above, from 9 October 2020, any firm whose long-term credit rating falls to, or below, BBB-/Baa3/BBB (low) or equivalent after 1 March 2020 will have their aggregate drawing limit capped at a maximum of £300 million.
This will not affect outstanding drawings if already in excess of £300 million.
Process for new issuance into the CCFF
In order to support the revised credit quality requirements, issuers should notify the Bank at CCFF-Applications@bankofengland.co.uk of their intention to sell CP (either initial CP issuance or roll-overs of maturing CP) into the CCFF no later than 11am five Business Days prior to their requested sale date. The Bank will endeavor to confirm within that timeframe whether the transaction can proceed on the requested sale date.
Where a ‘point in time’ rating is obtained from a Credit Rating Agency, evidence of current investment grade status must date from no longer than eight weeks before the proposed date of issuance.
If the credit ratings/equivalent evidence of credit quality submitted with the issuers original application dates from no longer than eight weeks before any proposed date of issuance after the application is completed, no further evidence will be required.
These changes do not affect outstanding drawings which the CCFF will continue to hold until maturity unless, under the existing terms of the scheme, outstanding CP is repurchased early by the issuer.