Commission says taxpayer risk high in $700M CARES Act loan to Overland Park company
A congressional commission charged with oversight of federal coronavirus stimulus spending raised concerns on Monday about a $700 million loan from the U.S. Treasury to Overland Park shipping firm YRC Worldwide.
The Congressional Oversight Commission issued a report that says U.S. taxpayers appear to bear a high risk in the loan because of YRC’s precarious financial position in recent years.
The Treasury earlier this month agreed to loan YRC $700 million under a $17 billion fund within the CARES Act earmarked for making loans to companies deemed critical to national security. The Treasury said at the time that YRC is an important vendor to the U.S. Department of Defense and the loan would help sustain military supply chains.
In return, the Treasury would receive enough shares of YRC’s common stock to give the government a 29.6% equity stake in the company.
The Oversight Commission questioned how the Treasury decided that YRC was critical to national security.
The Treasury said in April that companies were eligible for the national security CARES Act loan program if they had a top-secret facility security clearance or had a defense contract with the highest national priority. Without those designations, companies could still get the loan if it had a recommendation from the Department of Defense or the Director of National Intelligence.
The Oversight Commission said it could understand companies like Boeing or General Electric receiving a national security loan.
“It is far from clear that the fourth-largest LTL (less-than-load) shipping company in the United States is critical to maintaining national defense because it reportedly delivers ‘food, electronics and other supplies to military locations around the country,’” the Oversight Commission report said.
Moreover, the commission said the YRC loan posed a risk to taxpayers.
“YRC has been rated non-investment grade for over a decade, struggled financially for years before the COVID-19 crisis, and was at risk of bankruptcy before it obtained a loan from the Treasury,” the commission said.
Officials with YRC and the Treasury did not respond to a request for comment.
Sen. Jerry Moran, a Kansas Republican who sits on the U.S. Senate Banking, Housing and Urban Affairs Committee, discussed during a hearing in May with Treasury Secretary Steven Mnuchin the importance of helping YRC keep its 30,000 employees. Some 24,000 of those employees are members of the International Brotherhood of Teamsters.
“Under the CARES Act, the Secretary of Defense was given the discretion to make this determination in the interest of national security,” Moran’s office said in a statement to The Star. “However, I fully support the role of the commission to ensure taxpayer dollars are spent responsibly.”
This story was originally published July 20, 2020 at 5:29 PM.
