AutoNation, the U.S.’s largest car-dealership chain, on Friday gave back $77 million it received in forgivable loans.
Photo: Bizuayehu Tesfaye/Zuma PressA dozen of the public companies that received coronavirus hardship loans said they would return the money amid mounting scrutiny, while some of the smaller public companies said they needed the money to keep employees from losing their jobs.
The decisions are the latest twists in the rushed and turbulent rollout of the federal government’s Paycheck Protection Program, a portion of last month’s $2 trillion stimulus package intended to help small businesses and limit layoffs through the coronavirus pandemic. Lawmakers and independent business owners have criticized public companies for tapping a program that quickly ran out of funds.
On Friday, AutoNation Inc., the nation’s largest car-dealership chain with a $3 billion market capitalization, gave back $77 million it received in forgivable loans. An AutoNation spokesman said the company was eligible and applied on behalf of the 7,000 employees it furloughed.
Lindblad Expeditions Holdings Inc., a small cruise operator with a $250 million market cap, said it would keep the $6.6 million loan it received. The New York company, which employs 650 people, had more than $300 million in revenue last year. It voluntarily stopped all new expeditions on March 12 as the deadly virus spread and curbed travel.
“Since then, we have not generated any revenue, which has been financially devastating,” a spokeswoman said. “Despite this circumstance, Lindblad is the very rare travel company that has not imposed any layoffs, furloughs or salary reductions to date because of our access to the PPP.” The company doesn’t have ready access to capital, she added.
The Treasury Department on Thursday changed its guidelines for the paycheck loans amid criticism that dozens of public companies had received funds even as many small independent businesses missed out. It directed public companies that could tap capital markets to return the funds by May 7. Congress and President Trump agreed to add $320 billion in fresh funding after the initial $350 billion program was drained in two weeks.
Small-Business Loan Moves
As of April 24, more than 200 public companies had disclosed obtaining more than $775 million in paycheck-protection loans, according to a Wall Street Journal analysis of securities filings. While a few of the recipients were larger restaurant chains such as Ruth’s Chris and Shake Shack, most were microcap companies. The median market value was about $36 million and the median loan was $2.4 million.
The figures don’t include AutoNation, which didn’t disclose its $77 million of paycheck loans in securities filings. The company, which had a profit of $450 million on $21 billion in sales last year, applied through car-dealer franchises it owns that had under 500 employees apiece.
Ruth’s Hospitality Group Inc. and Shake Shack Inc. have agreed to return the money. On Friday, so did pharmaceutical manufacturer OptiNose Inc., which said it is returning $4.4 million, and restaurant owner J. Alexander Holdings Inc., which said it is returning $15.1 million.
So far a dozen public firms, including AutoNation, will return almost $160 million total, according to the Journal analysis. The funds returned could provide roughly 770 loans, at the average loan size of $206,000 reported by the Small Business Administration.
Meanwhile, one of the biggest recipients continued to pile up loans. Ashford Inc. disclosed Friday it had applied for dozens of additional SBA loans worth roughly $64.4 million, bringing its total under the program to about $123 million. Ashford, which previously said it planned to use the funds to bring back furloughed workers, declined to comment.
The government has more than once modified the rules about who is in and who is out when it comes to the program. In its latest guidelines, released Friday, the Treasury Department and SBA said hedge funds and private-equity firms don’t qualify, but small casinos do.
The SBA was less clear when it came to portfolio companies with private-equity investors. The agency said such borrowers must attest that economic uncertainty threatens the company’s viability. That is similar to what the Treasury said Thursday to deter publicly owned companies from applying.
Scott Pearson, a lawyer for Manatt, Phelps & Phillips LLP, expects portfolio companies to return the funds, to the detriment of their employees. “A lot of investors run their businesses as businesses,” he said. “If cash flow suggests cutting costs, the natural thing to do is cut costs” and lay off workers.
On gambling, the SBA reversed itself amid industry lobbying. On April 14, the SBA said only places that had small gambling operations, like restaurants with a few slot machines, could qualify. On Friday, it said all casinos that are small businesses—generally 500 or fewer employees—could qualify. The SBA declined to comment.
Fiesta Restaurant Group Inc. received two loans totaling $15 million. The company, which owns the Taco Cabana and Pollo Tropical chains, had a net loss of $84 million on revenue of about $660 million last year. It employed more than 10,000 people.
The Dallas company said it was reviewing the new paycheck loan guidance. The company said, in a securities filing, that if it decided to keep the loans, it would use them solely for payroll costs and benefits, including recent pay increases for its hourly workers.
—Ruth Simon and Theo Francis contributed to this article.
First In Line
Companies that have disclosed receiving Paycheck Protection Program loans
Employee and revenue data as of last fiscal year reported to SEC. Market caps as of April 20. *Company said it will give back loan
SEC filings
Write to Inti Pacheco at inti.pacheco@wsj.com and Bob Davis at bob.davis@wsj.com
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