HM Treasury has recently announced the launch of the Covid Corporate Financing Facility (CCFF). The facility provides a new means of lending to larger firms eligible to participate. By offering to issue commercial paper directly to the Bank of England (BoE) companies can receive an immediate cash injection by selling short term debt. Established and operated by the BoE, the CCFF is wholly guaranteed by the Treasury.

What is Commercial Paper?

Commercial paper is an unsecured, short term debt instrument issued by companies to raise funds generally for a time period of up to one year. Companies can issue commercial paper to obtain ready cash, in exchange for which they commit to redeeming the paper when due for more than its issue price.

Businesses do not need to have previously issued commercial paper in order to participate in the CCFF.

Who is Eligible?

The CCFF is available to companies which make a material contribution to the UK economy and which were in sound financial health prior to the COVID-19 shock. The BoE has indicated that companies which meet the material contribution to the economy test will usually:

  • be incorporated in the UK (including UK subsidiaries with foreign incorporated parents) and have a genuine business in the UK;
  • have significant employment in the UK; or
  • be headquartered in the UK.

The BoE will also consider companies that generate significant revenues in the UK, serve large numbers of customers in the UK or have a number of operating sites in the UK. The facility is not available to financial institutions.

The BoE has posted eligibility criteria on its website, which can be viewed here.

What counts as being in "sound financial health"?

Companies with a short or long-term credit rating of investment grade as at 1 March 2020 are considered as having been in sound financial health. At that date companies should have had a minimum short-term credit rating of A-3 / P-3 / F-3 / R3 from at least one of Standard & Poor's, Moody's, Fitch, and DBRS Morningstar. Provided the company can show good financial health before 1 March 2020 a downgrading will not make it ineligible. If a short-term credit rating is not available the BoE will consider whether a long-term credit rating can be used, or whether it can assess that the issuer is of equivalent financial strength.

For companies without a credit rating the BoE has advised the following:

  1. Speak to your bank - Companies that wish to apply to participate must contact their finance provider to discuss their eligibility. Only certain banks have the facilities in place to deal with commercial paper and only those set up to do so can advise on eligibility. A list of banks that are placed to assist can be found here.
  2. Contact the Bank of England - If your bank suggests that you hold an equivalent investment grade rating you should then contact to discuss your eligibility directly.
  3. Contact a credit rating agency - Obtaining a credit rating assessment from one of the UK's major credit rating agencies can also be used to prove a company's eligibility. It is important to specify that the rating is to be used in connection with the facility.

How long will the facility run?

The BoE have confirmed that the facility will operate for an initial period of 12 months but may be extended if required. The BoE will provide 6 months' notice of withdrawal of the facility.

Is there a minimum amount?

The minimum amount of commercial paper that can be issued and offered to the BoE under the facility is £1 million nominal issued in increments of £100,000.

How will the facility be priced?

The financing terms will be comparable to those prevailing in markets in the period before the COVID-19 economic shock.

Public Bodies & Charities

Local authorities and other public bodies which are subject to direct or indirect state or regional influence will not be eligible to participate in the CCFF. By extension, state funded primary and secondary schools, as well as trade unions will also be unable to participate.

Charities and universities not subject to state or regional influence may be eligible to apply to the CCFF provided that they meet the eligibility criteria set out above.

How to Apply?

Businesses that, after following the steps above, believe they may be eligible to apply to participate in the facility must complete the eligibility and application forms available on the BoE's website.

The individual completing the forms must also provide evidence of their authority to sign the documents.

The completed documents along with the signatory's authorisation should then be submitted to the following email address

Confirmation of eligibility will then be issued once the documents have been reviewed. Upon receipt of confirmation, an eligible company must set up a commercial paper programme. To allow companies to quickly establish a commercial paper programme the BoE have provided a suite of simplified standard market documentation on their website.

A further set of comprehensive standard market documents can also be found on the ICMA's website where required.

How Brodies can help?

With guidance on eligibility and application processes constantly evolving as the UK adjusts to the shock of COVID-19 it can be difficult to find up to date information. Brodies can help advise your business, whatever its size, on the latest facilities available to offer relief.