The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides $2 trillion in economic relief for Americans and businesses suffering economic difficulties due to COVID-19 pandemic. Under the Act, a $500 billion pool of money was created to make loans, loan guarantees, and other investments for distressed businesses that do not qualify for the small business relief, including airlines, large nonprofit companies, states, and municipalities. This subtitle of the Act is known as the “Coronavirus Economic Stabilization Act of 2020.” The $500 billion relief package includes:
- $25 billion in loans and loan guarantees for passenger air carriers;
- $4 billion in loans and loan guarantees for cargo air carriers;
- $17 billion in loans and loan guarantees for businesses critical to maintaining national security; and
- $454 billion in loans and loan guarantees to distressed businesses meeting specified criteria, as determined by the Secretary of the Treasury.
These loans and loan guarantees include certain terms and conditions detailed in the Act, including:
- A prohibition on stock or equity buybacks until the date 12 months after the date of the loan or loan guarantee is no longer outstanding;
- A prohibition on dividends and other capital distributions until the date 12 months after the date of the loan or loan guarantee is no longer outstanding;
- A requirement that until September 30, 2020, qualifying companies must retain at least 90 percent of their employment levels as of March 24, 2020;
- Limitations on compensation for officers and high-earning employees until the date 12 months after the date of the loan or loan guarantee is no longer outstanding;
- A maximum five-year term;
- Not conditional on entering into, or re-negotiating a collective bargaining agreement; and
- Other conditions as the Secretary of the Treasury determines appropriate.
To be eligible, companies must:
- Be domiciled in the United States;
- Have most of their employees in the United States;
- Have incurred direct or indirect losses due to COVID-19 that jeopardizes their continued operations; and
- Not qualify for other adequate relief in form of loans or loan guarantees provided under the Act.
The authority granted under the Coronavirus Economic Stabilization Act expires on December 31, 2020. Any loans, loan guarantees, and other investments outstanding after such date may be restructured or modified, but not forgiven.