Trucking giant Yellow recently filed for bankruptcy due to rising labor costs and expensive debt. Unfortunately, taxpayers may take a hit after Yellow received a $729.2 million CARES Act loan that it only partially repaid before bankruptcy, according to The Wall Street Journal.
The Journal cited Treasury reports from July 1st that showed Yellow had only repaid $230 million in principle of its $729.2 million loan, along with another $68 million in interest payments. That means the government may lose $500 million from the loan.
To help guarantee the loan, the Treasury also took a 30% equity stake in the company, which it could end up losing pending bankruptcy proceedings.
The funds were disbursed in two tranches, with more than $300 million going toward paying off pre-existing business expenses and more than $400 million to pay for equipment.
The loan was made as part of a CARES Act program to keep critical supply chains running. Since Yellow had done some shipping for the military, it technically qualified for the loan. Now, the loan has come under scrutiny by both Republicans and Democrats, and there have been at least three government investigations into the circumstances surrounding the loan, according to the Journal.
A Congressional investigation found that while rank-and-file Pentagon officials recommended Yellow should not qualify for this loan, then-Treasury Secretary Steve Mnuchin called then-Secretary of Defense Mark Esper, who determined that Yellow would receive the funding.
Unfortunately, it’s unlikely the government will receive its full repayment, as the Treasury is third in line after other creditors to recover their loans in bankruptcy proceedings, and the assets that were bought with the loans have likely lost value.
Yellow should not have qualified for this program, and large spending programs open the doors to interference and malfeasance when they don’t contain detailed guidelines on who qualifies for funding.
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