Treasury Report Under Section 4026(b)(1) of the CARES Act on Loans to Air Carriers, Eligible Businesses, and National Security Businesses
Summary
Treasury's first report under section 4026(b)(1) of the CARES Act on loans to air carriers, eligible businesses and national security businesses. It sets out the section 4003 authority, with up to $25 billion for passenger air carriers, certified repair stations and ticket agents, up to $4 billion for cargo air carriers and up to $17 billion for businesses critical to national security, and the conditions on employment levels, compensation, stock repurchases, dividends and the warrant, equity or senior debt instrument owed to taxpayers. The report reflects one transaction on July 8, 2020: loans totalling $700 million agreed with YRC Worldwide Inc., described as a leading provider of Department of Defense supply transportation, of which $245 million had been disbursed, with a maturity date of 9/30/2024.
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“Treasury Report Under Section 4026(b)(1) of the CARES Act on Loans to Air Carriers, Eligible Businesses, and National Security Businesses.”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/treasury-report-under-section-4026-b-1-of-the-cares-act-on-loans-to-ai-f88da84e87/
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Report Under Section 4026(b)(1) of the CARES Act on
Loans to Air Carriers, Eligible Businesses, and National Security Businesses
Program Description
Section 4003 of the Coronavirus Aid, Relief and Economic Security Act (CARES Act)
authorizes the Treasury Department to make loans, loan guarantees, and other
investments to provide liquidity to eligible businesses related to losses incurred as a result
of coronavirus.
The CARES Act provides:
(1) up to $25 billion for loans and loan guarantees for passenger air carriers; eligible
businesses that are certified under 14 CFR part 145 and approved to perform
inspection, repair, replace, or overhaul services; and ticket agents (as defined in
49 U.S.C. § 40102);
(2) up to $4 billion for loans and loan guarantees for cargo air carriers; and
(3) up to $17 billion for loans and loan guarantees for businesses critical to
maintaining national security.
A loan or loan guarantee under section 4003 may be made in such form and on such
terms and conditions and contain such covenants, representations, warranties, and
requirements as the Treasury Secretary determines appropriate. However, the CARES
Act specifies a number of requirements applicable to these loans. Among other
requirements under the statute, borrowers must agree to maintain employment levels as
of March 24, 2020 to the extent practicable, and in any case not reduce their employment
levels by more than 10 percent from the levels on such date, until September 30, 2020.
Borrowers must also agree to certain restrictions on employee compensation; agree not
to repurchase stock, except to the extent required under a contractual obligation in effect
as of March 27, 2020; and agree not to pay dividends or make other capital distributions
with respect to the borrower’s common stock until 12 months after the loan has been
repaid.
In addition, the CARES Act requires that Treasury receive a warrant or equity instrument
in the borrower if the borrower is a public company (unless Treasury determines that the
issuance of warrants or equity is infeasible, in which case the company must provide a
senior debt instrument), or a warrant, equity instrument, or senior debt instrument if the
borrower is a private company, to compensate taxpayers.
Reporting Requirements
The CARES Act requires Treasury to make a number of disclosures regarding its loans
and loan guarantees under section 4003 of the CARES Act:
(1) under section 4026(a) of the CARES Act, not later than 72 hours after any
transaction under section 4003(b)(1), (2), or (3) of the CARES Act, Treasury must
publish on its website a description of the transaction, certain transaction terms,
and transaction documentation;
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(2) under section 4026(b)(1)(A) of the CARES Act, not later than seven days after any
loan or loan guarantee under section 4003(b)(1), (2), or (3), Treasury must submit
to Congress a report summarizing the actions taken under those provisions and
certain related financial information;
(3) under section 4026(b)(1)(B) of the CARES Act, not later than seven days after
delivering the report to Congress described above, Treasury must publish the
report on its website; and
(4) under section 4026(b)(1)(C) of the CARES Act, every 30 days while a loan or loan
guarantee under section 4003(b)(1), (2), or (3) is outstanding, Treasury must
publish on its website a report summarizing its reports to Congress described
above.
Current Report
This is Treasury’s first report under section 4026(b)(1) of the CARES Act and reflects one
transaction on July 8, 2020.
Treasury entered into one loan transaction under section 4003(b)(1), (2), or (3), for a total
of $700 million. Of this amount, $245 million has been disbursed.
YRC Worldwide Inc.
Treasury agreed to make loans totaling $700 million to YRC Worldwide Inc. (YRC). YRC
is a leading provider of Department of Defense supply transportation and other delivery
services for the U.S. Government. An initial disbursement of the Tranche A loan in the
amount of $245 million was made on July 9, 2020.
The loans will be made in two tranches, both of which will be secured. Tranche A
provides $300 million to meet certain of YRC’s near-term contractual obligations and non-
vehicle capital expenditures, with an interest rate equal to LIBOR plus 3.5%, consisting of
1.5% cash and 2.0% payment in kind. Tranche B provides $400 million for capital
investments made pursuant to capital plans subject to approval by Treasury, with an
interest rate equal to LIBOR plus 3.5% in cash. Both tranches mature on September 30,
2024. The agreements include covenants by YRC to comply with certain restrictions on
employee compensation, stock repurchases, dividends, and reductions in employment
levels, as required by the CARES Act. Treasury will receive shares equal to 29.6% of
YRC’s common stock on a fully diluted basis, to be held in a voting trust, as appropriate
taxpayer compensation. Pledged collateral comprises a third lien on all company assets
and a first lien on all assets that will be newly purchased.
The loan agreements are available on Treasury’s website at
https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-
industry/loans-to-air-carriers-eligible-businesses-and-national-security-businesses.
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Detailed Financial Statement ($ Thousands)
Total
Borrower Date of Loan Maturity Anticipated
Borrower Type1 City2 State2 Agreement Date Loan Amount Disbursements3
National Overland
YRC Worldwide Inc. KS 7/8/2020 9/30/2024 $700,000 $245,000
Security Park
1. Only certain categories of entities are eligible to receive loans under sections 4003(b)(1), (2), and (3) of the CARES Act. Under those
provisions, a borrower must be a passenger air carrier; a business that is certified under 14 CFR part 145 and approved to perform
inspection, repair, replace, or overhaul services; a ticket agent (as defined in 49 U.S.C. 40102); a cargo air carrier; or a business
critical to maintaining national security.
2. The location provided is the address included by borrowers in their applications and may not include all locations in which a borrower
operates.
3. Includes disbursements between July 8, 2020, and July 15, 2020.
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