At least 13 public companies have agreed to return coronavirus funds meant for small businesses after controversy erupted when the $349 billion Paycheck Protection Program (PPP) ran out of funds, leaving many struggling business owners unable to make ends meet.
According to the Wall Street Journal, one such company returning funds AutoNation, the country's largest car-dealership chain which said they would return a cumulative $77 million in forgivable loans.
Other companies returning funds include Ruth's Hospitality Group, Shake Shack, and pharmaceutical manufacturer OptiNose, Inc. - which will return $4.4 million. Restaurant owner J. Alexander Holdings will return $15.1 million, while sandwich chain Potbelly Corp gave back their $10 million loan on Saturday.
"We were surprised and disappointed when the fund was quickly exhausted, leaving many without help," the company said in a carefully crafted statement.
So far 13 public firms, including AutoNation, will return a total of almost $170 million, according to the Journal analysis. The funds returned could provide roughly 825 loans, at the average loan size of $206,000 reported by the Small Business Administration. -Wall Street Journal
On the other hand, companies such as cruise ship operator Lindblad Expeditions Holdings, which has a market cap of $250 million and had over $300 million in revenue last year, says they're keeping the $6.6 million loan they received. The company says that since March 12 when they voluntarily halted all new cruises, that they have not generated any revenue, "which has been financially devastating."
"Despite this circumstance, Lindblad is the very rare travel company that has not imposed any layoffs, furloughs or salary reductions to date because of our access to the PPP," the company said, adding that they don't have ready access to capital.
Another public company has applied for roughly $123 million in loans, Ashford Inc., says they'll keep whatever they receive.
To avoid a repeat, the Small Business Administration (SBA) and Treasury have revised the rules to restrict hedge funds and private-equity firms from accessing funds, though small casinos may still apply.
The SBA was less clear when it came to portfolio companies with private-equity investors. The agency said such borrowers must attest that economic uncertainty threatens the company’s viability. That is similar to what the Treasury said Thursday to deter publicly owned companies from applying. -Wall Street Journal
"A lot of investors run their businesses as businesses," said Scott Pearson, a lawyer for Manatt, Phelps & Phillips LLP, who expects portfolio companies to return the funds even if it will hurt their employees. "If cash flow suggests cutting costs, the natural thing to do is cut costs."