Commentary: SBA Consent to PPP Debtor Loan Provisions Under CARES Act II: Just Do It, Already!!!!!

Commentary: SBA Consent to PPP Debtor Loan Provisions Under CARES Act II: Just Do It, Already!!!!!

ABI Bankruptcy Brief

March 4, 2021

ABI Bankruptcy Brief

Commentary: SBA Consent to PPP Debtor Loan Provisions Under CARES Act II: Just Do It, Already!!!!!

by Thomas J. Salerno
Stinson LLP; Phoenix

CARES Act II finally provided for some eligibility for some debtors to finally have access to PPP loans under CARES Act II (“PPP III Loans”). Under CARES Act II, at least subchapter V, chapter 12 and chapter 13 debtors have eligibility for PPP III Loans (providing amendments to Bankruptcy Code § 364). Champagne corks had barely finished popping when bankruptcy lawyers read the full text of CARES Act II, which has the extraordinary “Mother, may I” clause. While hope sprang eternal with a changing of the guard at the Department of the Treasury (with Janet Yellen now confirmed as Secretary) and the pending nomination of Isabella Guzman for Administrator of the SBA (replacing Mr. Mnuchin and Ms. Carranza from the prior administration), at least this author optimistically hoped that these changes would also bring about a shift in anti-debtor sentiment at both Treasury and the SBA. With only weeks left before CARES Act II’s PPP loan program is set to expire (barring extension), what has the SBA done? Well, nothing. Nothing at all. The SBA (either through oversight or intentional policy) has “pocket-vetoed” this part of CARES Act II and done nothing. In this instance, inaction is a definitive action: The PPP III Loans of CARES Act II cannot legally go into effect without affirmative SBA consent, and time is most certainly running out. Most debtors are waiting, anxiously awaiting, some blessing from the hallowed halls of D.C. for help in their distress — but not everyone. One debtor in Connecticut decided to take the battle to the SBA. On March 2, 2021, Chip’s Southington LLC decided to force the issue and is seeking (in the form of a mandamus/injunction action) an order requiring the SBA to give its consent under § 320(f), thereby fulfilling CARES Act II’s stated purpose. Click here to read the full commentary.

Senate Vote on Stimulus Bill Likely Pushed into Weekend

The Senate enters the final stages of debating President Joe Biden’s $1.9 trillion pandemic relief bill today, with passage in the chamber likely pushed off until the weekend, Bloomberg News reported. Senate Majority Leader Chuck Schumer (D-N.Y.) had planned to kick off the process yesterday, but lacked an official cost estimate on the latest version of the bill, which has been trimmed down from the House-passed measure. In addition to stripping out a minimum-wage increase to comply with Senate rules, Biden agreed to moderate Democrats’ demands for tightening eligibility for $1,400 stimulus checks, which will also affect the Congressional Budget Office’s calculation of the overall price tag. Once the CBO’s numbers are in and the Senate votes to begin debate, a process starts that Republicans are threatening to drag out as long as possible to register their opposition to the massive bill. The Senate is plowing ahead despite warnings from federal law enforcement agencies that a militia group might have been plotting to attack the Capitol today, about two months after a Jan. 6 siege of the building by extremist supporters of then-President Donald Trump that led to five deaths. The threat may extend into the weekend as the Senate deals with the coronavirus relief bill. A joint intelligence bulletin late Tuesday from the Homeland Security Department and the Federal Bureau of Investigation warned that extremists discussed carrying out attacks at the Capitol from March 4 to March 6.

Experts Examine Important Consumer Bankruptcy Law Changes Enacted in December

Legislative measures throughout 2020 were aimed at providing economic stability to meet the challenges of the financial distress caused by the COVID-19 pandemic, and December saw a flurry of activity that resulted in the Combined Consolidated Appropriations Act of 2021. The $2.3 trillion spending bill combined $900 billion in stimulus relief for the COVID-19 pandemic with a $1.4 trillion omnibus spending bill for the 2021 federal fiscal year. The bill passed both chambers of Congress on Dec. 21 and was signed into law by the President on December 27. Within the nearly 5,600 pages of this bill were important changes to the Bankruptcy Code. In this podcast, ABI Consumer Committee Co-Chair Christopher L. Hawkins of Bradley Arant Boult Cummings LLP (Birmingham, Ala.) discusses the changes with Charissa Potts of Freedom Law, PC (Eastpointe, Mich.) and John Rao of the National Consumer Law Center (Boston).

Texas Watchdog Says Power Grid Operator Made $16 Billion Error

A firm hired to monitor Texas’s power markets says the region’s grid manager overpriced electricity for almost two days during last month’s energy crisis, resulting in $16 billion in overcharges, Bloomberg News reported. Amid the deep winter freeze that knocked nearly half of power generation offline, the Electric Reliability Council of Texas, known as Ercot, set the price of electricity at the $9,000-a-megawatt-hour maximum — standard practice during a grid emergency. But Ercot left that price in place days longer than necessary, resulting in massive overcharges, according to Potomac Economics, an independent market monitor hired by the State of Texas to assess Ercot’s performance. In an unusual move, the firm recommended in a letter to regulators that the pricing be corrected and that $16 billion in charges be reversed as a result. Potomac isn’t the first to say that leaving electricity prices at the $9,000 cap for so long was a mistake. Plenty of power companies at risk of defaulting on their payments have said the same. But the market monitor is giving that opinion considerable weight and could sway regulators to let companies off the hook for some of the massive electricity charges they incurred during the crisis. The Arctic blast that crippled Texas’s grid and plunged more than 4 million homes and businesses into darkness for days has pushed many companies to the brink of insolvency and stressed the power market, which is facing a more than $2.5 billion payment shortfall. One utility, Brazos Electric Power Cooperative, has already filed for bankruptcy, while retailer Griddy Energy LLC defaulted and has been banned from participating in the market.

U.S. Jobless Claims Tick Up to 745,000 as Layoffs Remain High

The number of Americans applying for unemployment benefits edged higher last week to 745,000, a sign that many employers continue to cut jobs despite a drop in confirmed viral infections and evidence that the overall economy is improving, the Associated Press reported. Today’s report from the Labor Department showed that jobless claims rose by 9,000 from the previous week. Though the pace of layoffs has eased since the year began, they remain high by historical standards. Before the virus flattened the U.S. economy a year ago, applications for unemployment aid had never topped 700,000 in any week, even during the Great Recession. All told, 4.3 million Americans are receiving traditional state unemployment benefits. Counting supplemental federal unemployment programs that were established to soften the economic damage from the virus, an estimated 18 million people are collecting some form of jobless aid. In Texas, applications for benefits surged by nearly 18,000 in the aftermath of freezing weather and power outages. And jobless claims rose by more than 17,000 in Ohio, where the weekly totals have been thrown off by potentially fraudulent claims. Restrictions on businesses and the reluctance of many Americans to shop, travel, dine out or attend mass events have weighed persistently on the job market. Job growth averaged a meager 29,000 a month from November through January, and the nation still has nearly 10 million fewer jobs than it did in February 2020.

CFPB Report: More than 11 Million Families at Risk of Losing Housing

The Consumer Financial Protection Bureau (CFPB) issued a report on March 1 that warns of widespread evictions and foreclosures once federal, state and local pandemic protections come to an end, absent additional public and private action. Over 11 million families are behind on their rent or mortgage payments: 2.1 million families are behind at least three months on mortgage payments, while 8.8 million are behind on rent. Homeowners alone are estimated to owe almost $90 billion in missed payments. The last time this many families were behind on their mortgages was during the Great Recession. The federal government is going to great lengths to protect homeowners and renters. Recent actions by the Federal Housing Finance Agency, the Federal Housing Administration, the Department of Veterans Affairs and the U.S. Department of Agriculture prohibit lenders from foreclosing on most mortgages until June 30, 2021. After that date, families who cannot resume making regular payments will need to make an agreement with their lender to avoid foreclosure. Residential eviction protections for renters have been extended through March 31, 2021.

Submissions for Asset Sales Committee’s “Asset Sale of the Year” Award Extended to April 5!

ABI’s Asset Sales Committee has extended the application period for its 3rd Annual Asset Sale of the Year Award. Submissions are now due by Monday, April 5, 2021. Please see below for more information regarding the contest as well as previous winners. Criteria for submissions include:

• Completion of a sale that was strategic and provided stakeholders with value;
• A display of excellence across the full spectrum of the sale process, from the initial targeting through pursuit, structuring and financing to complete a transaction;
• A sale that reflects a high level of professional expertise in the design of the transaction, and that tested creativity and skill in completing the transaction; or
• A sale of strategic or legal significance and impact (winning entries might focus on overcoming challenges to complete the sale, innovative financial engineering, and motivating agreement across multiple stakeholders)

A bankruptcy sale (via either § 363 or a plan) that closed between January 1 and December 31, 2020.

At least one professional involved in the sale must be a member of the Asset Sales Committee as of the nomination deadline. Self-nominations are permitted.

Click here for more information.

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New on ABI’s Bankruptcy Blog Exchange: CFPB Officially Proposes Delay of QM Changes

The Consumer Financial Protection Bureau issued a proposal moving the compliance date for the Qualified Mortgage rule revamp to October 2022, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.