Public corporations are rushing to repay paycheck protection program loans under pressure from the government

Ruth’s Hospitality Group

, the owner of Ruth’s Chris Steak House, DMC Global, Wave Life Sciences, and Kura Sushi, are repaying the paycheck protection program loans they received when the government warned larger public corporations not to abuse emergency funding efforts for small businesses.

On Thursday, the Treasury Department issued new guidelines on the Small Business Administration’s Paycheck Protection Program, informing larger companies that have tapped it that they may be in hot water for violating certifications they issued when applying for funding .

“It is unlikely that a publicly traded company with significant market value and access to capital markets will be able to provide the required certification in good faith,” the Treasury Department said.

Pressure on the dozen of public companies that have received emergency loans has built since the $ 349 billion small business paycheck protection program ran out of money last week. Some of these public companies have market capitalizations in excess of $ 100 million.

“The certification language in #PPP is real and enforceable,” said US Senator Marco Rubio, one of the key political forces behind the program, on Twitter on Monday. “That is why every company (of any size) that has not suffered from the current economic framework & still applies for & receives #PPP has a big problem. You have issued a false certificate to the federal government. “

The small business emergency funding program offered two-year loans of up to $ 10 million, the bulk of which is forgivable when most of the proceeds are used to keep employees. While the loans are for small businesses with fewer than 500 employees, some restaurant chains that employed no more than 500 people in a single location were allowed to receive the loans.

The certifications that companies applying for paycheck security loans were required to provide were relatively extensive and unclear. The key certification that companies had to perform was simple: “The uncertainty of current economic conditions makes the loan application necessary to support the day-to-day operations of the eligible recipient.”

On Tuesday, Treasury Secretary Steven Mnuchin urged major public companies to follow the lead of Shake Shack, the burger chain that announced earlier this week that it would repay its $ 10 million paycheck protection loan. Mnuchin made it clear that the government would resolve the certification issue in such a way that some larger, publicly traded companies would be forced to return the money.

“There is certification that people do and I ask people to just make sure this was for companies that needed the money … the intent of that money was not for large public companies that have access to capital,” said Mnuchin.

“Certain people in the PPP may not have clearly understood the certification so we give people an edge when in doubt … If you repay the loan immediately you will not have any liability to the SBA and the Treasury, but there are serious consequences for those who do not properly certify this certification. “

President Donald Trump also said he would urge big companies to return the money. Kura Sushi, the US publicly traded restaurant chain that is majority-owned by a Japanese company, said Wednesday it would repay the $ 5.98 million loan it received through the federal government’s paycheck protection program have.

On Thursday, the Treasury Department said in its new policy that companies should not participate in PPP if they “have access to other sources of liquidity sufficient to support their day-to-day operations in a way that does not materially harm business.” The government said companies that return PPP funds by May 7 will not violate the certifications.

After the guidelines were released on Thursday, publicly traded Ruth’s Hospitality said it would repay the $ 20 million it received under the program. The company was also under public pressure, which included a widespread petition, to return the funds.

DMC Global, A Colorado manufacturer of perforating systems for the oil industry who was among the higher-rated public companies participating in the PPP returned Thursday the $ 6.7 million it received through the program after the government approved the issued new guidelines. Wave Life Sciences, a Singapore-based biotechnology company with extensive operations in the US, has also repaid its $ 7.2 million PPP loan after the guidelines were published. Asset manager Manning & Napier said it canceled a $ 6.7 million PPP loan agreement prior to funding. Sweet green, a $ 1.6 billion fast-casual salad chain said Thursday it would return its $ 10 million paycheck protection program loan.

Unless Congress approves new funding for the Paycheck Protection Program, the funds these companies return cannot be used to provide new small business loans. The Senate on Tuesday approved a $ 484 billion package that would replenish the program that the House of Representatives appears to have passed on Thursday.

Not all of the larger public companies that have received the emergency loans are ready to return the money just yet. Fiesta Restaurant Group, which has received $ 10 million in funding through the PPP, said Thursday it was “is currently reviewing the application of the guidelines and will take a decision on its plans.”

Disclosure: Forbes Media LLC confirmed on July 6, 2020 that it received a $ 5 million to $ 10 million paycheck protection program loan on April 15, 2020.

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