The coronavirus pandemic is disrupting businesses large and small. While the Paycheck Protection Program (PPP) was intended to help small- to medium-sized businesses (SMBs) weather the economic storm, some larger companies received loans from the program.
The Treasury Department, for its part, is feverishly seeking to find a method to get hundreds of millions in funds from large companies that applied for the loans and attained them under the original terms of the program, The New York Times reported.
The Los Angeles Lakers, in one case, were said to be the newest exhibit of a large firm that was able to qualify for a loan from a program, which was created in a rush. (The Lakers have reportedly returned the funds.)
Steven Mnuchin, the secretary of the Treasury, said the administration would audit any firm that took in over $2 million. Congress made the program as part of March’s $2 trillion economic relief package, which it meant to serve as a lifeline for SMBs. Eligibility requirements were not specific, but the money made companies keep staffers on the payroll for two months if the firms sought to have the loans forgiven.
The parent company of Taco Cabana and Pollo Tropical, Fiesta Restaurant Group, has said in a federal filing that it will be giving back $15 million in PPP loans, CNBC reported. Fiesta took in just under $160 million in revenue in the fourth quarter of 2019, and its shares were higher by over 20 percent on Wednesday (April 29) in midday trading.
The company received loans to indirect subsidiaries Texas Taco Cabana, LP, and Pollo Operations Inc. from JPMorgan Chase. Its loans were first reportedly made public in a Morgan Stanley report on big public firms that received the funds. Fiesta has a market cap in excess of $205 million.
On April 23, the Treasury Department put forward new guidance directing public companies to give back PPP loans by May 7 if they are not able to prove they were eligible for a loan.
A few days before the news surfaced, Shake Shack CEO Randy Garutti and Founder Danny Meyer said they were giving back a $10 million PPP loan. They wrote in a letter on LinkedIn, “We’ve decided to immediately return the entire $10 million PPP loan we received last week to the SBA so that those restaurants who need it most can get it now.”
But, while a share of the over 200 publicly traded companies that received PPP funds agreed to return the millions they received, many are keeping the money, claiming it will be used for paying furloughed staffers.