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WASHINGTON D.C. — Today, the Congressional Oversight Commission held its third public hearing to examine the funds authorized by the CARES Act that provide up to $17 billion for loans and loan guarantees to businesses critical to maintaining national security. U.S. Treasury Secretary Steven Mnuchin was the sole witness at the hearing. At the hearing, and after conducting thorough oversight of these loans, Rep. French Hill (AR02) expressed particular concerns with the loan provided to YRC Worldwide by the Treasury, stating that he believes it might have been a misstep by the federal government. He used the hearing to raise these concerns and get answers for the American taxpayer.

“At today’s hearing, I voiced my concerns to the Treasury Secretary about the loan made to YRC Worldwide,” said Rep. Hill. “YRC Worldwide has been hanging on by a thread since the global financial crisis and has survived only because of government bailouts and financial assistance from the private equity industry. After analyzing the data and reviewing YRC’s collateral, I would not have given this company a loan.”

Watch Rep. French Hill’s opening remarks and questions from the hearing HERE or by clicking on the image below.

Rep. Hill’s key questions for Secretary Mnuchin are copied below:

Rep. Hill: When you were reviewing this credit application, were you aware of this debt-for-equity swap and trouble YRC had at the end of the financial crisis?

Secretary Mnuchin: I believe the team was. I was not specifically aware of that.

Rep. Hill: So, in addition to the valuation questions on the collateral pool I talked about, I wondered if the team had had conversations with the other senior creditors for tranche A on a different sharing arrangement before you agreed to the terms.

Secretary Mnuchin: Well, I can tell you we obviously had discussions with other creditors because we needed intercreditor agreements on other issues. I personally don’t recall any of those conversations. Adam Lerrick who led the team was here and can follow up with your office. And again, let me just reiterate Representative Hill and others. This was a risky loan. We have been fortunate that the economy recovered and that the equity is doing well, and I am going to recommend that next year whoever is Treasury Secretary seriously look at selling this loan in recovering what I think will be a profit to taxpayers because this was a success. We do not want to be in the long-term business of lending to this type of company or any of the national security companies, but, fortunately, we have made a significant profit and taxpayers should get paid back.

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Rep. Hill: What recommendations would you make, now having gone through this CARES Act, when it comes to drafting this kind of language in the future, for future treasury secretaries?  Would you have a different caveat than simply having the DOD secretary certify that a company is essential to national security, and in your personal view do you think an LTL trucking company is essential to national security? 

Secretary Mnuchin: Let me just say, if I had to do it all over again, I would use the same criteria. Again, I think the intent when we did this was there was going to be some big companies, but again, we set up the intent early on. It’s not my position to comment on the DOD’s certification, although I will make a comment that I do agree with. I hope that the Pentagon looks at all of their critical vendors and looks at the financial condition in spreading risk. Had they not had this type of exposure, perhaps they wouldn’t have certified it.

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Rep. Hill: From my review of the collateral pool, it does not look like it’s at all adequately secured for covering both Apollo and tranche A plus the other obligations of the company. I just would ask your view: did you look at the collateral pool and do you believe that the collateral protected the American taxpayers?

Secretary Mnuchin: The answer to that is yes. We did a thorough analysis of the collateral pool. We consulted with Perella Weinberg who was our financial advisor on this loan and all the national security loans and let me comment we did get equity and our equity is currently worth $100 million dollars.