WASHINGTON ― Because fewer than 20 firms sought to apply for $17 billion in federal loans for Defense Department suppliers hurt by the coronavirus pandemic, the Trump administration is weighing how to broaden the eligibility requirements, a top Pentagon official said Thursday.
“The challenge is that this $17 billion worth of loans comes with some fairly invasive kind of riders, and I think companies have to think very carefully about whether that makes good business sense for them,” Under Secretary of Defense for Acquisition and Sustainment Ellen Lord said at a Pentagon news conference.
Treasury Secretary Steven Mnuchin, whose agency is implementing the loans, is requiring public companies seeking a share of $17 billion in coronavirus-related relief offer an equity stake to the government.
“It may not be as interesting as for private companies, so that’s one of the differentiators I see,” Lord said.
The loans were intended for companies operating top secret facilities and with DX-rated contracts, which means the Pentagon deems them of highest national priority.
“I am not sure that companies with DX-rated contracts are the ones that have the most critical needs. They have had a little less than 20 companies reach out to date,” Lord said.
The Treasury Department has been in consultation with the Pentagon, and it’s been open to ways the loan program could be expanded ― potentially to firms the Pentagon designates, Lord said.
“So I’m hoping that early next week, between the Treasury Department and the Department of Defense, we can come back with a little bit more fidelity to the defense industrial base to better identify who might most benefit from this particular money,” Lord said.
The agency had set a May 1 deadline for applications.
The $17 billion tranche in the CARES Act for COVID-19 relief was widely assumed to be targeted at Boeing, which is a prime defense contractor and had indicated that it might seek assistance. However, U.S. lawmakers have said the loans are intended to span the defense supply chain, said Andrew Hunter, director of the Center for Strategic and International Studies’s Defense-Industrial Initiatives Group.
“I would just say the requirements under that program are pretty strict that," he said. "You have to be really in desperate need for financing and have no access to other forms of financing, you have to accept a lot of limits on how the business operates: [on] share buybacks, dividends, executive compensation. And so it’s really been designed and set up as a lender of last resort to firms that really need that assistance.”