Treasury's Seventh Report Under Section 4026(b)(1) of the CARES Act

Summary

A U.S. Department of the Treasury report under Section 4026(b)(1) of the CARES Act; it is Treasury's seventh such report and reflects four transactions with new borrowers, all made under section 4003(b)(3) to businesses critical to maintaining national security. Treasury's total commitment under the four transactions was $7,524,600, all disbursed: Channel Logistics, LLC ($2,500,000), SpinLaunch, Inc. ($2,519,200), SemahTronix, LLC ($1,999,100) and Semantic AI, Inc. ($506,300). Each loan is secured by all the assets of the borrower at LIBOR plus 3.5%. The report also reflects $166,979,069 disbursed to five entities whose loans closed earlier, including a $152 million draw by Mesa Airlines, Inc. on November 13, 2020.

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“Treasury's Seventh Report Under Section 4026(b)(1) of the CARES Act.” Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/u-s-department-of-the-treasury-4026-b-1-b-loan-report-11-19-2020-d0bca67634/, SHA-256 dd13059a963669fdfa49061d0aa3b138f005814a84d23038fb5a31ab0ded35c2.

Full text

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 seventh report under section 4026(b)(1) of the CARES Act and reflects
four transactions with new borrowers: one transaction on November 12 and three
transactions on November 13, 2020. Treasury made these four loans pursuant to section
4003(b)(3) of the CARES Act. Treasury’s total commitment under these four transactions
was $7,524,600, all of which has been disbursed.

This report also reflects disbursements to five entities whose loans closed before the
reporting period: one disbursement on November 13 and four disbursements on
November 16, 2020. The total amount disbursed to these five entities during this
reporting period was $166,979,069.

Channel Logistics, LLC

Treasury agreed to make a loan totaling $2,500,000 to Channel Logistics, LLC
(Channel), a business critical to maintaining national security with approximately 6 U.S.
employees in March 2020.

Treasury made the loan pursuant to section 4003(b)(3) of the CARES Act. The loan is
secured by all the assets of Channel. It has an annual interest rate equal to LIBOR
plus 3.5% and matures on November 12, 2025. Treasury funded the full loan amount
at close. The loan proceeds will be used to provide liquidity to continue Channel’s
operations. The transaction agreement includes covenants by Channel to comply with
certain restrictions on employee compensation, stock repurchases, dividends, and
reductions in employment levels, as required by the CARES Act. The loan constitutes
senior indebtedness of Channel, and Treasury will receive 3% payment-in-kind annual
interest on the loan in accordance with section 4003(d) of the CARES Act.

SemahTronix, LLC

Treasury agreed to make a loan totaling $1,999,100 to SemahTronix, LLC
(SemahTronix), a business critical to maintaining national security with approximately
172 U.S. employees in March 2020.

Treasury made the loan pursuant to section 4003(b)(3) of the CARES Act. The loan is
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secured by all the assets of SemahTronix. It has an annual interest rate equal to
LIBOR plus 3.5% and matures on November 13, 2025. Treasury funded the full loan
amount on November 18, 2020. The loan proceeds will be used to provide liquidity to
continue SemahTronix’s operations. The transaction agreement includes covenants
by SemahTronix to comply with certain restrictions on employee compensation, stock
repurchases, dividends, and reductions in employment levels, as required by the
CARES Act. The loan constitutes senior indebtedness of SemahTronix, and Treasury
will receive 3% payment-in-kind annual interest on the loan in accordance with section
4003(d) of the CARES Act.

Semantic AI, Inc.

Treasury agreed to make a loan totaling $506,300 to Semantic AI, Inc. (Semantic), a
business critical to maintaining national security with approximately 51 U.S. employees
in March 2020.

Treasury made the loan pursuant to section 4003(b)(3) of the CARES Act. The loan is
secured by all the assets of Semantic. It has an annual interest rate equal to LIBOR
plus 3.5% and matures on November 13, 2025. Treasury funded the full loan amount
at close. The loan proceeds will be used to provide liquidity to continue Semantic’s
operations. The transaction agreement includes covenants by Semantic to comply
with certain restrictions on employee compensation, stock repurchases, dividends, and
reductions in employment levels, as required by the CARES Act. The loan constitutes
senior indebtedness of Semantic, and Treasury will receive 3% payment-in-kind
annual interest on the loan in accordance with section 4003(d) of the CARES Act.

SpinLaunch, Inc.

Treasury agreed to make a loan totaling $2,519,200 to SpinLaunch, Inc. (SpinLaunch),
a business critical to maintaining national security with approximately 66 U.S.
employees in March 2020.

Treasury made the loan pursuant to section 4003(b)(3) of the CARES Act. The loan is
secured by all the assets of SpinLaunch. It has an annual interest rate equal to LIBOR
plus 3.5% and matures on November 13, 2025. Treasury funded the full loan amount
on November 18, 2020. The loan proceeds will be used to provide liquidity to continue
SpinLaunch’s operations. The transaction agreement includes covenants by
SpinLaunch to comply with certain restrictions on employee compensation, stock
repurchases, dividends, and reductions in employment levels, as required by the
CARES Act. The loan constitutes senior indebtedness of SpinLaunch, and Treasury
will receive 3% payment-in-kind annual interest on the loan in accordance with section
4003(d) of the CARES Act.

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
Total
Borrower Date of Loan Maturity Anticipated
Borrower Type1 City2 State2 Agreement Date Loan Amount Disbursements3

American Jet
International Passenger Air
Houston TX 11/5/2020 11/5/2025 $1,162,124 $1,162,124
Corporation Carrier

Aviation
Management & Repair Station
Fort Pierce FL 11/5/2020 11/5/2025 $4,026,705 $4,026,705
Repairs, Inc. Operator

Channel National
Camden NJ 11/12/2020 11/12/2025 $2,500,000 $2,500,000
Logistics, LLC Security

Mesa Airlines, Passenger Air
Phoenix AZ 10/30/2020 10/30/2025 $200,000,0004 $195,000,000
Inc. Carrier

SemahTronix, National
Flippin AR 11/13/2020 11/13/2025 $1,999,100 $1,999,100
LLC Security

Semantic AI, National
San Diego CA 11/13/2020 11/13/2025 $506,300 $506,300
Inc. Security

SpinLaunch, National
Long Beach CA 11/13/2020 11/13/2025 $2,519,200 $2,519,200
Inc. Security

Thomas Global Repair Station
Systems, LLC Irvine CA 11/9/2020 11/7/2025 $1,400,000 $1,400,000
Operator

Timco Engine Repair Station
Center, Inc. Oscoda MI 11/5/2020 11/5/2025 $8,390,240 $8,390,240
Operator

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 to Channel Logistics, LLC on November 12, 2020; Mesa Airlines, Inc. and Semantic AI, Inc. on November
13, 2020; American Jet International Corporation, Aviation Management & Repairs, Inc., Thomas Global Systems, LLC, and Timco
Engine Center, Inc. on November 16, 2020; and SemahTronix, LLC and SpinLaunch, Inc. on November 18, 2020. Also includes a
disbursement of $43 million to Mesa Airlines, Inc. on October 30, 2020.
4. Treasury agreed to make a loan of up to $200 million to Mesa Airlines, Inc. The company elected to draw $43 million at close on
October 30, 2020 and $152 million on November 13, 2020, and no further draws on the loan are available.

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