A congressional oversight commission said Monday it will investigate the $700 million US loan to YRC Worldwide, but it’s unclear whether anything short of legislation would prevent the less-than-truckload (LTL) carrier from getting the COVID-19 relief loan announced July 1. 

The oversight commission established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act on Monday questioned whether YRC Worldwide actually is as critical to maintaining national security as the Treasury and Defense departments indicated.

The commission didn’t call on Treasury to drop the loan or change its terms, but did question the loan’s legitimacy. It also noted that none of the remaining $16.3 billion from the pool of funds tapped for the YRC Worldwide loan had yet been made available to airlines, as the commission said it expected would be done.

According to the commission, Treasury defines a “business critical to maintaining national security” as one 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.

YRC, the commission said, didn’t meet either of those requirements, but its loan request was approved under a “catch-all” provision allowing Treasury to declare a company critical if the secretary of defense or the director of national intelligence recommend and certify that it is.

Although Treasury said YRC Worldwide provides 68 percent of less-than-truckload services to the US Department of Defense, the commission said “it is far from clear that the fourth-largest LTL shipping company in the United States is critical to maintaining national defense.”

Secretary of Defense Mark Esper, however, certified that YRC Worldwide is critical to national security, and the trucking holding company said it has spent decades building a strong support network for the US military, handling more than 300,000 shipments a year for the US government, primarily military shipments.

The loan threw a lifeline to YRC Worldwide, which faced a cash crunch that could have shut the company down. Critics of the loan within the trucking industry have said, though not for attribution, they believe YRC’s competitors could absorb the company’s military volume.

Shippers, however, were relieved by the loan. which brought stability to the LTL market at an uncertain time for the US economy. A reshuffling of the market might benefit some LTL carriers, but shippers would likely experience tighter capacity and higher LTL rates.

Were loan terms too favorable?

In its third monthly report, the commission also questioned whether the loan terms met appropriate standards, noting the interest rate on the Treasury’s loan is 4 percent lower than the rate YRC Worldwide received on a five-year term loan from its creditors last September.

The report also noted YRC Worldwide’s ongoing financial struggles. “This loan may indicate that the Treasury believes the national security designation permits a much higher risk tolerance to provide relief to firms that were struggling well before the COVID-19 pandemic,” it said. 

“If that is the case, the commission would like to better understand the rationale for this risk tolerance, especially in light of the statutory restrictions on national security loan terms,” the commission said, noting this is the only such loan Treasury has made to date.

The $700 million loan to YRC Worldwide infuriated competitors, some of whom, JOC.com has learned, urged representatives on Capitol Hill against offering any lifeline to the company before Treasury’s surprise July 1 announcement.

The commission’s members include Sen. Pat Toomey (Republican-Pennsylvania), Rep. Donna Shalala (Democrat-Florida), Rep. French Hill (Republican-Arkansas), and Bharat Ramamurti, a senior advisor to Sen. Elizabeth Warren (Democrat-Massachusetts). 

An oversight commission can raise questions about the executive branch’s execution of laws passed by Congress, such as the CARES Act, and bring pressure on the executive branch to rethink or change a decision in several ways, most directly through legislation. No timetable has been released for an investigation, but the threat of one had an immediate impact on YRC Worldwide’s stock on Wall Street, driving its share price down from a high of $3.57 per share to $2.61 per share by 4 pm Monday, a 27 percent drop.