Q&A: Loans to Air Carriers and Eligible Businesses and National Security Businesses (Treasury, updated as of April 10, 2020)
Summary
A Treasury Department question-and-answer document, Loans to Air Carriers and Eligible Businesses and National Security Businesses, updated as of April 10, 2020. It states that the CARES Act provides funding for up to $46 billion in loans to certain eligible businesses, with $25 billion for passenger air carriers, Part-145 certified repair station operators and ticket agents, $4 billion for cargo air carriers and $17 billion for businesses critical to maintaining national security. It describes a national security business as one performing under a DX-priority rated contract or holding a top secret facility security clearance, or one certified by the Secretary of Defense or the Director of National Intelligence. A borrower must agree to maintain employment levels as of March 24, 2020 and not cut them by more than 10 percent through September 30, 2020.
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“Q&A: Loans to Air Carriers and Eligible Businesses and National Security Businesses (Treasury, updated as of April 10, 2020).”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/q-a-loans-to-air-carriers-and-eligible-businesses-and-national-securit-7e4527305c/
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Q&A: Loans to Air Carriers and Eligible Businesses and National Security Businesses
Updated as of April 10, 2020
GENERAL
1. What is this loan program?
The Coronavirus Aid, Relief and Economic Security (CARES) Act provides funding for up
to $46 billion in loans to certain eligible businesses related to losses incurred as a result of
coronavirus. Eligible businesses include:
• passenger and cargo air carriers;
• U.S. businesses that have not otherwise received adequate economic relief in the form
of loans or loan guarantees provided under the CARES Act that are
o certified under 14 CFR Part 145 and approved to perform inspection, repair,
replace, or overhaul services (“Part-145 certified repair station operators”);
o ticket agents as defined in 49 U.S.C. § 40102; or
o businesses critical to maintaining national security.
Specifically, $25 billion is available for loans to passenger air carriers, Part-145 certified
repair station operators, and ticket agents; $4 billion is available for loans to cargo air
carriers; and $17 billion is available for loans to businesses critical to maintaining national
security.
2. What is the purpose of the loan program?
Borrowers can apply for loans to obtain liquidity to offset covered losses, which include
losses incurred directly or indirectly as a result of the coronavirus pandemic, as determined
by the Treasury Department.
ELIGIBILITY, TIMING, AND MECHANICS
3. When can companies apply for loans?
For air carriers, Part-145 certified repair station operators, and ticket agents, the Treasury
Department has released a draft loan application form for informational purposes, to enable
potential applicants to begin preparing the required information. As of April 6, 2020, the
Treasury Department has not yet begun accepting applications. In the coming days, the
Treasury Department will provide a web-based form for application submissions.
For businesses critical to maintaining national security, the Treasury Department is
developing guidance and application materials and expects to release these materials in the
near future.
4. What is “a business critical to maintaining national security”?
A business critical to maintaining national security is one that, unless otherwise approved as set
forth below, is at the time of the business’s application:
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o (1) performing under a “DX”-priority rated contract or order under the Defense
Priorities and Allocations System regulations (15 CFR part 700); or
o (2) operating under a valid top secret facility security clearance under the National
Industrial Security Program regulations (32 CFR part 2004).
Applicants that do not satisfy either of these two criteria may be considered for loans if, based on a
recommendation and certification by the Secretary of Defense or the Director of National
Intelligence that the applicant business is critical to maintaining national security, the Secretary of
the Treasury determines that the applicant business is critical to maintaining national
security. Businesses that do not meet these criteria may nonetheless be eligible for assistance
under other CARES Act programs.
5. When and how will the loans be approved and disbursed?
After the Treasury Department receives loan applications from potential borrowers, the
Treasury Department will evaluate the application, communicate with applicants as
appropriate, and make determinations regarding the timing of loan approvals and
disbursements.
PROGRAM REQUIREMENTS AND RESTRICTIONS
6. Are there any requirements placed on borrowers?
To receive a loan, a borrower must agree that:
• It will maintain employment levels as of March 24, 2020 to the extent practicable,
and in any case not reduce its employment levels by more than 10 percent from the
levels on such date, at least until September 30, 2020.
• Neither the borrower nor any affiliate of the borrower may purchase an equity
security of the borrower or any parent company that is listed on a national securities
exchange. This restriction does not apply if the borrower or affiliate is required to
purchase such a security under a contractual obligation in effect as of March 27,
2020.
• It will not pay dividends or make other capital distributions with respect to the
borrower’s common stock until 12 months after the borrower has repaid the loan.
7. Are there restrictions on certain officers’ or employees’ compensation?
Yes. Borrowers receiving a loan must agree to certain limits on the total compensation of
certain officers and employees. These limits are described in Section 4004 of the CARES
Act. These restrictions will end 12 months after repayment of the loan.
8. Will there be service requirements for air carriers receiving a loan?
Yes. The CARES Act authorizes the Secretary of Transportation to require air carriers
receiving loans under this program to maintain certain scheduled air transportation. For more
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information, see https://www.transportation.gov/coronavirus.
TAXPAYER PROTECTIONS
9. How will taxpayer funds be protected?
The CARES Act generally requires that the Treasury Department receive a warrant or equity
instrument in the borrower if the borrower is a public company, or a warrant, equity
instrument, or senior debt instrument if the borrower is a private company. Applicants will
be invited to submit proposals on the form and amount of taxpayer protections they propose
to provide. Together with the other data and information provided in the applications, the
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Treasury Department will develop standards for adequate and appropriate taxpayer
protections.
AVAILABILITY OF ALTERNATIVE FINANCING
10. What evidence does the Treasury Department seek from applicants to demonstrate that
credit is not reasonably available elsewhere?
Under Section 4003(c)(2)(A) of the CARES Act, the Treasury Department may lend to
eligible businesses for which credit is not reasonably available at the time of the transaction.
The Treasury Department and its financial and legal advisors will take into account evidence
from the prospective borrower’s particular circumstances, including its relationships with
existing and potential creditors, as well as general market conditions.
AVAILABLE FUNDS
11. What happens if the total requests for loans exceed the maximum amounts of funds
available under the CARES Act?
The Treasury Department will use the data and information provided by applicants to
determine how to allocate the funds available for loans in a fair and equitable fashion.
COLLECTIVE BARGAINING AGREEMENTS
12. Are there any limitations on loan conditions related to collective bargaining
agreements?
Yes. Under Section 4025(a) of the Act, the Treasury Department shall not condition the
issuance of a loan on a borrower’s implementation of measures to enter into negotiations
with the certified bargaining representative of a craft or class of employees of the borrower
under the Railway Labor Act or the National Labor Relations Act regarding pay or other
terms and conditions of employment.
CONFIDENTIALITY
13. Will the Treasury Department make a public statement acknowledging receipt of
applications and naming applicants?
From time to time, the Treasury Department may make public statements concerning the
implementation of this program. The Treasury Department is not identifying specific
applicants at this time.
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14. Will the applications be made public or will they remain confidential?
The Treasury Department does not intend to make applications publicly available, except as
required by law. The Treasury Department may disclose applications as necessary to fulfill
obligations under the CARES Act or other applicable law, including disclosure to:
• the Department of Transportation, to coordinate concerning the implementation of the
Loan program; and
• the Treasury Department Office of Inspector General.
The Treasury Department will also respond to requests for agency records as appropriate
under the Freedom of Information Act (FOIA), including FOIA’s provisions related to
confidential business information.
For further details and application forms, please see the Procedures and Minimum Requirements
for Loans to Air Carriers and Eligible Businesses and National Security Businesses.
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