CARES Act update

We are continuing to keep you abreast of information from our Washington, D.C. office. See below for a brief summary of the CARES Act, introduced in the Senate last evening. Attached you will find more detailed information on the CARES Act, including specific committee provisions and the full text of the legislation.

These proposals are a starting point from Senate Republicans to begin negotiations with Democrats. In addition, House Republicans want input on the final product. Negotiations will continue over the next few days. Senator McConnell has made it clear the Senate will not depart until this stimulus package is approved by the Senate, which will require a bipartisan agreement to reach the necessary 60 votes. Should this process run smoothly, the Senate could consider legislation as soon as this weekend.

Once the Senate passes a bill, the House will be called back to Washington to vote on the bill.  With two House Members testing positive for COVID-19 recently, the leaders will likely look to expedite floor consideration of a bill to avoid the threat of additional infections.

The legislation allows the Treasury Secretary to provide up to $208 billion in collateralized loans and loan guarantees to American industries whose operations are jeopardized as a direct result of the coronavirus outbreak. Of the $208 billion, $58 billion is allocated to facilitate liquidity in the airline sector, and an additional $150 billion is provided for the same purposes in other distressed sectors of the American economy.

Summary of the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020:

  • The legislation provides a total of $208 billion to the Secretary of the Treasury, through the Exchange Stabilization Fund, to provide sufficiently collateralized loans and loan guarantees to eligible entities, broken out in the following amounts:
    • Up to $50 billion for passenger air carriers;
    • Up to $8 billion for cargo air carriers; and
    • Up to $150 billion for other eligible entities.
  • The Treasury Secretary is afforded flexibility to provide collateralized loans and loan guarantees to domestic businesses that have incurred losses as a direct result of the coronavirus global pandemic so they can maintain operations. 
  • Entities eligible for loans or loan guarantees are those for whom credit is not otherwise reasonably available at the time of the transaction. 
  • An entity is only eligible for relief if the Treasury Secretary determines its continued operations are jeopardized as a result of losses stemming directly from the coronavirus outbreak.   
  • Interest rates on any loans extended by the Treasury Secretary may be no less than the current average yield on outstanding marketable obligations of the United States of comparable maturity.
  • The legislation explicitly bars the Treasury Secretary from using the funds provided to make grants or direct cash payments to entities: “Nothing in this Act shall be construed to allow the President or [Treasury] Secretary to provide relief to eligible entities except in the form of sufficiently collateralized loans and loan guarantees.”
  • The legislation also mandates that entities receiving assistance under the Act do not increase compensation for, or provide golden parachutes to, executives over a two-year period from the date of enactment.
  • The legislation directs the Secretary of the Treasury, to the extent feasible and practicable, to ensure that the Government is compensated for the risk assumed in making loans and loan guarantees. To that end, “the [Treasury] Secretary is authorized to enter into contracts under which the Government, contingent on the financial success of the eligible entity, would participate in the gains of the eligible entity or its security holders through the use of such instruments as warrants, stock options, common or preferred stock, or other appropriate equity instruments.”

We’ve also included the various committee press releases that walk through each section:

Small Business – https://www.rubio.senate.gov/public/index.cfm?p=Press-Releases&id=EBEF6EE0-C6AD-44EB-B833-F9F004CD5EFA

Appropriations – https://www.appropriations.senate.gov/news/shelby-thune-wicker-unveil-liquidity-assistance-for-distressed-american-industries-within-coronavirus-package

Finance Tax – https://www.finance.senate.gov/chairmans-news/senators-recommend-tax-policies-for-phase-3-coronavirus-response

HELP1 – https://www.help.senate.gov/imo/media/doc/Side%20By%20Side%20HELP%20Committee%20Provisions.pdf

HELP2 – https://www.finance.senate.gov/imo/media/doc/Finance%20Committee%20Provisions%20Section%20by%20Section.pdf

We will keep you updated on the progress, and as always, please call our Washington, D.C. or Lafayette office with any questions.

Best,

Faith Garbett 
Director of Administration 
1200 Camellia Blvd, Suite 101 
Lafayette, LA 70508  o: 337.362.1121 | c: 337.254.2082 
The Picard Group

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