The Fund will purchase CP issued by companies or limited liability partnerships (“LLPs”) (in each case, including their finance subsidiaries) that (i) make a material contribution to economic activity in the United Kingdom (UK) and (ii) with a credit quality that is considered investment grade as at 1 March 2020.
Material contribution to economic activity in the UK
UK incorporated companies and LLPs, including those with foreign-incorporated parents and with a genuine business in the UK, will normally be regarded as meeting this requirement.
In addition, companies and LLPs with significant employment in the UK or with their headquarters in the UK will normally be regarded as meeting this requirement. Decisions will also take into consideration whether the company or LLP generates significant revenues in the UK, serves a large number of customers in the UK or has a number of operating sites in the UK.
Minimum credit quality
- Where available, a minimum short-term credit rating of A-3 / P-3 / F-3 / R3 or above, or a long-term rating of BBB-/Baa3/BBB-/BBB (Low) or above from at least one of Standard & Poor’s, Moody’s, Fitch and DBRS Morningstar as at 1 March 2020. This reference point is deliberately set prior to the possible impact of Covid-19 on firms’ short-term credit ratings. Issuers with split ratings where one or more rating is below the minimum are not eligible.
- Where an issuer does not have a public investment grade rating, there are two further options for applicants to consider.
- Firstly, the Bank accepts banks’ internal ratings of issuers to assess credit status. Firms will ordinarily be required to have at least three investment grade bank ratings and no speculative grade bank ratings as at 1 March 2020. To avoid a single bank’s credit view unduly affecting the overall assessment, we will generally not exclude firms with speculative grade ratings provided the average of bank ratings available is at least BBB/Baa2/BBB/BBB. And we will only accept two bank ratings as sufficient proof of investment grade status where both view the firm as strongly investment grade i.e. BBB+/Baa1/BBB+/BBB(High) or above. Where applicants submit confirmations of their banks’ ratings to the Bank directly, they are asked to do so in a form that clearly evidences that they derive from the bank rather than the applicant. The Bank will also ask the issuer to attest that they have disclosed all bank ratings related to their principal direct on-balance sheet borrowings.
- A second route is to seek an assessment of credit quality from one of the major credit rating agencies. The credit assessment should be as at 1 March 2020 in a form that can be shared privately with the Bank of England and HM Treasury. More information on the rating products viewed as suitable evidence of credit status can be found on the the Covid Corporate Financing Facility page.
If an issuer is downgraded after 1 March 2020 below the minimum credit ratings set out above, the issuer will remain eligible for primary and secondary market purchases in the CCFF, subject to HM Treasury approval.
Eligibility decisions will be made by the Bank and HM Treasury’s respective risk management staff. Each of the Bank and HM Treasury reserves the right, in its sole discretion, to deem any issuer ineligible for any reason after taking into account the information available to it.
CP issued by public bodies or authorities, entities governed by public law or public undertakings will not be eligible. This may include entities which are partially owned by a public body or authority. For these purposes, a ‘public undertaking’ refers to an undertaking over which a State, or other regional or local authorities of a State, may directly or indirectly exercise a dominant influence by virtue of their ownership of it, their financial participation therein or the rules which govern it.
CP issued by banks, building societies, insurance companies and other financial sector entities regulated by the Bank or the Financial Conduct Authority will not be eligible. CP will also not be eligible if issued by:
- leveraged investment vehicles; or
- companies within groups or LLPs within groups (including their affiliates), in each case which are predominantly active in businesses subject to financial sector regulation.
Companies and LLPs that do not currently issue CP but are capable of doing so, and of meeting the CCFF eligibility requirements, will in principle be eligible to access the CCFF.
Further information on the eligibility criteria can be found on the Covid Corporate Financing Facility page.
The Bank will require issuers whose CP will be offered to the Fund in the primary market to contact the Bank directly, to discuss its eligibility and to provide the necessary documentation. The Bank will require issuers to sign a confidentiality agreement. Issuers should contact the Bank at CCFFemail@example.com.
The Bank recognises that some issuers who may wish to use the CCFF are not regular counterparties of the Bank. To make usage as easy as possible a webpage with further information can be found at the link below: