If the ABS matures in four years and the TALF loan matures in three years, is the borrower responsible for selling the collateral and repaying the loan at the end of the third year?
At the end of the three-year period the loan must be repaid. The borrower may (1) repay the loan, at which time the New York Fed will release the collateral, or (2) arrange for the sale of the collateral and instruct the New York Fed to deliver the ABS to the counterparty against payment. The settlement amount of the sales transaction must either be equal to, or greater than, the loan amount outstanding, or the borrower must make up any shortfall to repay the loan in full, including accrued interest, before the New York Fed will deliver the ABS. Any excess sale proceeds will be remitted back to the borrower. At maturity, a borrower may surrender the collateral to the New York Fed, in lieu of repaying the outstanding principal or interest on a TALF loan, by delivering a Collateral Surrender and Acceptance Notice with respect to such loan by the maturity date.
Related Questions
- If the ABS matures in four years and the TALF loan matures in three years, is the borrower responsible for selling the collateral and repaying the loan at the end of the third year?
- Must an eligible borrower own newly issued ABS it plans to pledge as collateral for a TALF loan at the time it subscribes for the loan?
- If a TALF-financed ABS incurs a principal loss, would the loss be allocated between the borrower’s haircut and the TALF loan?
