Primary Market Corporate Credit Facility (PMCCF)

The Primary Market Corporate Credit Facility (PMCCF) was a special purpose vehicle (SPV) created on March 23, 2020 by the Federal Reserve designed to maintain the flow of credit to large employers in the face of the COVID-19 crisis. The Fed lent money to the SPV, which made loans to investment grade corporations and bought corporate bonds to help them continue to function through the crisis. The loans had a maturity of up to four years and corporations could defer payment for six months. The purpose of the program was to ensure companies had enough credit to keep functioning so they could limit layoffs, which would further worsen the recession.

The program was expanded to purchase more bonds and bonds of lower credit quality on April 9, 2020. A related initiative by the Fed was the Secondary Market Corporate Credit Facility (SMCCF). Between the two initiatives, the Fed purchased $750 billion in bonds.

On Nov. 19, 2020, Treasury Secretary Steven Mnuchin said he would not reauthorize extending the PMCCF past Dec. 31, 2020. The program stopped buying new bonds on Dec. 31, 2020.

Key Takeaways

  • The Fed has been trying to keep credit available to major employers during the COVID-19 crisis.
  • To do this, the Fed created the Primary Market Corporate Credit Facility (PMCCF).
  • The Fed lended money to the PMCCF, which bought corporate bonds from and extended loans to corporations.
  • Companies could use the credit to keep operations going and people employed during the economic downturn.
  • The program was substantially expanded on April 9, 2020, and ended on Dec. 31, 2020.

Details on the PMCFF

The Primary Market Corporate Credit Facility (PMCCF) was an SPV that purchased bonds and extended loans to companies. The U.S. Department of the Treasury provided $50 billion from its Exchange Stabilization Fund (ESF) to the PMCCF. The bonds purchased were the collateral for the loans that the Fed gave the PMCCF. 

The Federal Reserve Bank of New York (FRBNY) managed the PMCCF and lent to it on a recourse basis. Corporate bonds that were eligible for purchase by the PMCCF must have been issued by companies that were headquartered in the U.S., that had material operations in the U.S., and that were not expected to receive direct federal financial assistance.

Eligible bonds also were required to have a rating of at least BBB- or Baa3 as of March 22, 2020, from a major nationally recognized statistical rating organization (NRSRO) or by at least two major NRSROs if rated by more than one. If they were subsequently downgraded, after March 22, then they were required to be rated BBB-/Baa3 by two or more NRSROs.

The PMCCF limited its holdings from a given issuer to 130% of the maximum amount of bonds and loans that were outstanding from that issuer on any day between March 22, 2019 and March 22, 2020.

The PMCCF was also excluded from lending to issuers that received specific support from the CARES Act or any subsequent federal laws. Companies also had to satisfy conflict of interest requirements under section 4019 of the CARES Act. They could also not be a depository institution as defined under the Dodd-Frank Act.

Subject to approval by the Fed, an issuer could choose to delay all or part of a scheduled interest payment, instead having the amount added to the principal value of the bond or loan. Issuers also had the right to call any bonds or loans held by the SPV at par. Eligible issuers had to pay a commitment fee of 100 basis points. The pricing would also be "subject to minimum and maximum spreads over yields on comparable maturity U.S. Treasury securities." Spread caps and floors would vary based on an eligible issuer's credit rating as of the date on which the Facility makes a purchase.

The PMCCF stopped buying bonds or extending loans after Dec. 31, 2020. The New York Fed has continued to fund this SPV until its assets mature.

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  1. Board of Governors of the Federal Reserve System. "Federal Reserve Announces Extensive New Measures to Support the Economy." Accessed Aug. 26, 2020.

  2. Federal Reserve. "Primary Market Corporate Credit Facility," Pages 1–2. Accessed Aug. 26, 2020.

  3. Financial Times. "US Treasury Refuses to Extend Some of Fed's Crisis-Fighting Tools." Accessed Nov. 20, 2020.

  4. Board of Governors of the Federal Reserve System. "Term Sheet - Primary Market Corporate Credit Facility," Page 1. Accessed Aug. 26, 2020.

  5. Federal Reserve. "Federal Reserve Board Announces an Extension Through December 31 of Its Lending Facilities That Were Scheduled to Expire on or Around September 30." Accessed Aug. 26, 2020.