Calumet Specialty Products Partners repaid $31.4 million in federal Paycheck Protection Program loans Monday, two weeks after acknowledging that it could face penalties under shifting government policies for the program.
The federal government had set Monday as a deadline for companies to return funds without facing repercussions for accepting loans in violation of guidelines about types of companies that the program was meant to help. The United State Treasury Department modified eligibility rules after a public outcry about publicly traded companies receiving funds intended to help small businesses struggling to survive economic impacts of the Covid-19 pandemic.
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“As the requirements and expectations for the PPP program continue to change, particularly with respect to publicly traded companies receiving funding under the PPP, we decided that the right thing to do was to repay the PPP loans,” the company told the Indianapolis Business Journal according to a Tuesday article. Calumet did not respond to questions from Lube Report.
On May 1, the Indianapolis-based producer of base oils and other specialty petroleum products accepted $31.4 million in funding divided among five separate loans under the Paycheck Protection Program, according to federal documents and the company’s Securities Exchange Commission filings. A New York times analysis published May 18 found that Calumet’s loan was the fourth-largest among 446 publicly traded companies that disclosed receiving the small-business loans.This total was about $13 million more than any of the other more than 400 publicly traded-companies receiving the forgivable loans, according to multiple news reports.
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The Small Business Administration will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. The government appropriated $659 million for the program in two phases.
The program was part of the Trump administration’s efforts to help small business survive the padlock that the Covid-19 pandemic has placed on the economy. Under the regulations, small businesses with fewer than 500 employees were eligible for the loans, but the program’s roll-out was riddled with problems, including complaints by small business owners that large, publicly-traded companies were receiving millions of dollars in loans. The federal government had set a May 18 deadline for large companies to return Paycheck Protection Program loans.
Six days after receiving the cash infusion, Calumet CEO Steve Mawer said during an earnings conference call that the company is on solid footing financially. He started the call by stating that federal and state authorities have “deemed our business essential to the national economic infrastructure ….”
According to a transcript of the call, Mawer then described Calumet’s first quarter as “solid,” with $87.3 million in adjusted earnings before interest, taxes, depreciation, and amortization. He added that the company had healthy reserves of cash and available credit totaling “over $326 million of available liquidity” by the end of the first quarter.
Calumet explained in its SEC filings about the Paycheck Protection Program loan that it made a “good faith” certification that the loans were appropriate because a jolt of cash was needed to continue operations during the economically challenging pandemic. Additionally, the company conceded in the filing that it “could in the future be determined to have been impermissible” to receive the program funding. A portion of the program loans were secured before the Treasury Department modified eligibility guidelines. Calumet acknowledged worries that if found in violation of the new rules it could possibly face “significant civil, criminal and administrative penalties.”
The company said in Monday’s SEC filing that as of April 30, and including the effect of repaying the Paycheck Protection Program loans, the company had total liquidity of about $211 million, comprised of $80 million of cash on hand and approximately $131 million of availability under its revolving credit facility.