The congressional coronavirus response oversight panel questioned Monday why the Treasury Department loaned $ 700 million to a cash-strapped shipping company in an effort to protect national security.
In a report released Monday, the Congressional Oversight Commission tasked with monitoring trillions of dollars in emergency aid said it would further explore how and why shipping company YRC Worldwide received a rescue loan for essential defense companies. national.
“The Commission intends to explore the decision to appoint YRC as critical to maintain national security, in part, because the risk of loss of money from American taxpayers on this loan seems high, “the panel wrote.
“The level of risk assumed on the YRC loan appears surprisingly higher than the risks associated with the other facilities over which the Commission oversees.”
The $ 2.2 trillion Coronavirus Aid, Relief and Economic Security Act (CARES) allocated $ 500 billion to the Federal Reserve and Treasury for emergency loans and grants, including a group of more than $ 30 billion earmarked for the sector aeronautical, airlines and other essential businesses. to national defense.
On July 8, the Treasury and YRC finalized a $ 700 million loan from the national security tranche after the Department of Defense certified that YRC is essential to national security. YRC specializes in “less than one truckload” shipments, where smaller loads from multiple customers are combined into a single trailer.
The Treasury rated YRC as a “leading provider of critical military transportation and other transportation services,” in a July 1 press release, which included 68 percent less cargo than truckload services for the Department of Defending. The company also has contracts with the Departments of Energy and Homeland Security.
Still, the oversight commission questioned whether propping up the YRC was really essential to national security and expressed concern about the company’s past financial problems causing future losses for taxpayers.
Under the CARES Act, a company can qualify for a national security-related loan if it complies with a high-priority contract from the Department of Defense or if it operates under a top-secret security authorization. YRC did not qualify under any of those terms, the panel wrote, but rather “under a general provision created by the Treasury … based solely on a recommendation and certification by the Secretary of Defense or the Director of National Intelligence.”
“It is not at all clear that the fourth largest LTL shipping company in the United States is critical to maintaining national defense because it allegedly delivers ‘food, electronics and other supplies to military locations across the country,'” the commission wrote.
The commission also expressed concern about YRC’s long-standing financial problems and whether the terms of the loan match the risks of loans to the company. The panel noted that YRC’s debt has been rated below investment grade for more than a decade and that the company obtained a five-year, $ 600 million loan with an interest rate 4 percent higher than the cost of your loan from the Treasury. The Treasury also acquired a 29.6 percent stake in YRC as a term of the loan.
“But given the company’s non-investment grade long-term rating and previous bankrupt closed calls over the years, it is not clear that a shareholding in YRC will provide much, if any, taxpayer compensation or protection, ”the commission wrote.
“The Commission would like to better understand the justification for this risk tolerance, especially in light of the legal restrictions on the terms of national security loans and the fact that the single loan that the Treasury has granted to date is for a company that cannot be critical to maintaining national security, “he added.
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