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Treasury Secretary Steven Mnuchin told a congressional oversight committee that the federal government has made money on a $700 million loan it extended to YRC Worldwide under a coronavirus relief package for businesses that were deemed essential in fighting the pandemic.
“Fortunately, we’ve made a significant profit,” Mnuchin said during a Dec. 10 hearing. “I am going to recommend that next year whoever is Treasury secretary seriously look at selling this loan and recovering what I think will be a profit to taxpayers, because this was a success.”
Treasury approved the loan to Kansas-based YRC under the Coronavirus Aid, Relief, and Economic Security Act, which received broad bipartisan support in Congress and was signed into law by President Donald Trump on March 27. CARES Act funds were designated for companies critical to national security. YRC ships supplies between military bases.
The funds for the YRC loan came from $17 billion allocated for national security companies. YRC received the largest loan; the 10 other companies that qualified for loans received $35.9 million combined. Mnuchin noted that earlier expectations had been that companies such as Boeing Co. or General Electric Co. might needs loans, but the rebound in the economy and markets proved better than anticipated. The more than $16 billion of the pot that remains should now be reallocated by Congress, Mnuchin said.
He added that his agency doesn’t want to be in the business of making long-term loans to YRC or any national-security companies.
“We are not saying this is a market loan,” Mnuchin said. “Had it been a market loan, Treasury would not have been involved.”
The congressional panel has been questioning the YRC loan for months. In July, it raised concern that the company was at risk of bankruptcy because it has been rated non-investment grade for more than a decade, and also carried a heavy pension burden.
YRC has financial backing from private equity firm Apollo Global Management Inc.
Representative French Hill, an Arkansas Republican on the panel, questioned whether the collateral pool backing the loan was worth as much as Treasury estimates.
“I think you’re vulnerable there,” Hill said.
Bharat Ramamurti, a Democratic appointee on the panel, raised questions about who would get paid back first: the U.S. government or Apollo.
Joanna Rose, a spokeswoman for Apollo, said in an email that the company was not involved in YRC’s decision to seek the Treasury funds.
“We are a capital provider for thousands of companies,” she said. “We are one of many lenders to YRC. Importantly, this is not a company controlled by Apollo funds.”
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