COVID Corporate Financing Facility - Updated guidance from the Bank of England

Further to our briefing published earlier this week, the Bank of England has issued further guidance which will be of particular interest for businesses who believe they may be eligible to access the Covid Corporate Financing Facility but which have not obtained a formal credit rating. This update looks at the further guidance issued and the next steps for those businesses

Please note: this update summarises the position as of this morning, Wednesday 25 March 2020. Further details and guidance may be released after the date of the briefing. We will continue to provide updates as further information is released.

What has changed in the Bank of England guidance?

The guidance still states that the clearest way to demonstrate the requirement that a business was in "sound financial health prior to the COVID-19 shock" is for the business to have, or to obtain, a formal credit rating from at least one of Standard & Poor’s, Moody’s, Fitch or DBRS Morningstar as at 1 March 2020 which meets the following minimum requirements:

• short-term credit rating of A-3 / P-3 / F-3 / R-3 or
• a long-term rating above BBB- / Baa3 / BBB-.

However, further guidance issued for businesses who believe they may be of the required credit rating but which do not have a formal credit rating offers another potential route rather than formally obtaining a rating from the rating agencies.

Businesses falling into this category are advised to speak to their usual bank and if the bank advises that the business is viewed by the bank internally as equivalent to investment grade as at 1 March 2020 then the business (or the bank) should contact the Bank of England to discuss potential eligibility. The Bank of England will then assess whether the business can be deemed as equivalent to having a public investment grade rating.

The guidance states that the assessment will draw on a range of information including the range of banks’ internal ratings across all of a firm’s commercial bank counterparties and that the business will need to be rated consistently by its banks as investment grade in order to be deemed equivalent to having a public investment grade rating.

Next steps for businesses which do not have a formal credit rating

The message is clear that businesses need to be speaking to their usual bank to obtain a firmer view on whether they are likely to be eligible for the CCFF and the best, and quickest route, to access the scheme.