July 21, 2020
Marcy Gordon THE ASSOCIATED PRESS
WASHINGTON – Congressional watchdogs are questioning the government’s decision to award a $700 million coronavirus relief loan to a struggling trucking company on grounds its operations are critical for maintaining national security.
YRC Worldwide provides transportation and logistics services, such as delivering food, electronics and other supplies to military locations around the country. The Defence Department is a major YRC client. The department, however, sued YRC in 2018 for overcharging the government for freight carrier services and making false statements.
Under terms of the coronavirus relief loan, U.S. taxpayers, through the Treasury Department, will take a 30 percent stake in the company. YRC, based in Overland Park, Kansas, will be required to maintain its payroll at the current level of an estimate 30,000 trucking jobs, and to limit executive compensation, dividend payouts and share repurchases.
The Congressional Oversight Commission also said in a report Monday that taxpayers appear to be at risk of losing money on the investment. YRC has had financial problems for years, well before the onset of the pandemic, and has been at risk of bankruptcy, the report said. The money is scheduled to be repaid by September 2024.
The congressional monitors said they questioned the decision to deem YRC’s business critical to national security and the process for reaching that decision. It’s the first and only loan made so far under the national security portion of Treasury’s corporate aid program, which has made several billions of dollars in loans to major airlines and smaller air carriers. The national security section, with an available pot of up to $17 billion, had been expected earlier this year to be earmarked for hard-pressed aircraft maker Boeing or for General Electric.
To qualify for the national security aid, companies should be performing under defence contracts of the highest national priority or operating under top-secret security clearance. YRC apparently didn’t meet either of the criteria, but qualified under a “catch-all” provision allowing a recommendation and certification from the secretary of defence or the director of national intelligence to be sufficient.
Treasury spokespeople didn’t immediately respond to a request for comment Monday.
The five-member oversight commission was appointed by congressional leaders of both parties to monitor the spending of some $2 trillion in economic aid enacted by Congress this spring and directed by the Treasury Department and the Federal Reserve.
Shares of YRC Worldwide Inc. fell 27% on Monday to close at $2.60. They jumped 75% on July 1, the day the relief loan was announced.