The Federal Reserve announced Tuesday that it will open a commercial paper funding facility to support the financing needs of companies facing stress amid the coronavirus outbreak.
The facility will support rollovers of commercial paper, a commonly used form of unsecured, short-term debt issued to raise funds.
With businesses forced to close and with consumer activity capped by quarantines around the country, concern has built up over previous weeks that companies will not be able to find funding to survive the public health crisis.
The commercial paper funding facility will establish a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper from eligible companies as long as the paper is rated A1/P1 as of March 17. The facility would be available to companies of various industries, not just banks.
“An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak,” the Fed said in a statement.
The facility was opened in coordination with the U.S. Treasury, which will provide $10 billion of credit production via its Exchange Stabilization Fund.