The trucking company that received a $700 million coronavirus relief loan spent $210,000 on lobbyists in the days before it reached an agreement with Treasury on that loan, according to lobbying reports filed with the Senate this week.
The money YRC Worldwide spent on lobbying during the second quarter of 2020 alone was more than three times what it spent on lobbying in 2019 and more than the $140,000 the company spent in 2018 and 2019 combined.
Now, a bipartisan congressional panel is criticizing the loan the company received as part of the $2 trillion coronavirus stimulus law, saying “it is far from clear” that YRC Worldwide is eligible for a lending mechanism originally designed for companies critical to national security, such as Boeing.
In a report released Monday, the Congressional Oversight Commission tasked with overseeing how the federal dollars allocated by the coronavirus stimulus law are spent also questioned the level of risk the government accepted when offering the Overland, Kan., based firm a loan.
“Given the company’s long-term non-investment grade rating and previous close calls with bankruptcy over the years, it is not clear that an equity stake in YRC will provide much, if any, compensation or protection to taxpayers,” the panel said in the report.
The terms of the loan give the government a 29.6 percent equity stake in YRC.
YRC received the loan under a provision of the law pertaining to companies deemed critical to national security. That provision was originally designed for Boeing, which later announced it had received sufficient liquidity to avoid using the loan program.
YRC, the fifth-largest trucking corporation in the United States, counts the Defense Department among its clients, but the commission questioned whether that business met the spirit of the law.
“The Treasury has defined a ‘business critical to maintaining national security’ as a business that is at the time of its application performing under a defense contract of the highest national priority or operating under a top secret facility security clearance,” the panel’s report read. “However, YRC qualified for the program under a catch-all provision created by the Treasury allowing it to determine if a business is critical to maintaining national security based solely on a recommendation and certification from the Secretary of Defense or Director of National Intelligence.”
The report said the company “struggled financially” and “was at risk of bankruptcy” before the pandemic and before receiving Treasury’s loan. It also found that the interest on the Treasury debt was four percent lower than the interest rate on the company’s most recent debt financing.
“The Commission has questions about the decision to deem YRC a business critical to maintaining national security and the process for reaching that conclusion,” the report read, saying that the commission “intends to conduct further oversight of this decision.”
Saddled with $880 million in debt even before the coronavirus hit, YRC Worldwide hired BGR Government Affairs and PricewaterhouseCoopers on April 1 and March 26, respectively, to lobby for them on trucking issues.
It paid BGR $130,000 between April 1 and June 30 and paid PricewaterhouseCoopers $80,000 during the same period.
By comparison, the company spent $60,000 in 2019 on Mullett Strategies LLC and $95,000 during all of 2018.
A spokesman for YRC declined to comment on their lobbying expenditures when reached by CQ Roll Call. PricewaterhouseCoopers also declined to comment, and spokespeople for BGR and the Treasury Department did not immediately respond to a request for comment.
BGR and PricewaterhouseCoopers are part of what has been a revolving door of firms helping YRC, which terminated its contract with Mullett in 2019. In 2019, it also terminated its contract with Squire Patton Boggs. In 2017, YRC terminated its contract with Morgan, Lewis and Bockius LLP. It terminated a contract with Gephardt Group Government Affairs in 2015.
On July 1, Treasury announced that it had reached an agreement with the company on a $700 million loan, saying its decision was based on a certification by Secretary of Defense Mark T. Esper that the company is critical to maintaining national security.
“This loan will enable a critical vendor to the Department of Defense to maintain significant employment while providing appropriate compensation to taxpayers,” said Treasury Secretary Steven Mnuchin in a release announcing the agreement.
The loan comes just as the company’s lenders gave the trucking company a reprieve through 2024 on at least some of its debt, according to the company’s securities filing.