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US CARES Act: Relief Available to US Subsidiaries of European Companies

For further information, please visit the White & Case Coronavirus Resource Center.

On March 27, 2020, the United States Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") became effective. The primary purposes of the CARES Act is to provide businesses affected by the novel coronavirus ("COVID-19") pandemic with financial assistance in the form of loans, loan guarantees, and other investments. In this alert, we advise you that the US subsidiaries of European companies may be eligible for the benefits of the CARES Act and provide an overview of the provisions of the CARES Act relating to such financial assistance, including the scope of such assistance, recipient eligibility, and the terms under which assistance may be provided.

 

Scope of Financial Assistance

Under the CARES Act, $500 billion will be made available to eligible businesses, states, and municipalities in the form of loans, loan guarantees, and other investments through programs supported by the United States Department of the Treasury (the "US Treasury").

 

Eligibility of US Subsidiaries of European Companies

Any US business that has not otherwise received "adequate economic relief" in the form of loans or loan guarantees under the CARES Act is eligible to apply for assistance under the CARES Act.

Under the applicable provisions of the CARES Act, a US business is a business that (i) was created or organized in the United States or under the laws of the United States (e.g., a Delaware limited liability company); (ii) has significant operations in the United States; and (iii) has a majority of its employees based in the United States.1

There is no exclusion in the CARES Act for US businesses owned or operated by foreign entities or individuals and, accordingly, US subsidiaries of European companies may be eligible to receive assistance through programs established under the CARES Act. If a US subsidiary was specifically formed to carry out US operations with dedicated US-based personnel, determining whether such US subsidiary is eligible may be straightforward. However, if a US subsidiary carries out operations in other countries as well as the US (e.g., a US subsidiary organized to operate throughout North America or the Americas) or relies on personnel based outside the US, a careful consideration of the subsidiary's operations and personnel will be necessary to determine eligibility.

 

Overview of Programs

As indicated above, the CARES Act calls for the establishment of multiple financial assistance programs. These programs fall into one of three categories:

  • General Programs: One or more programs established by the Board of Governors of the Federal Reserve System ("Federal Reserve") under which the US Treasury will provide indirect assistance via loans, loan guarantees, and other investments to businesses of any size;
  • Mid-Sized Business Program: A program under which the US Treasury will provide indirect assistance by financing banks that make low interest rate loans available to businesses with between 500 and 10,000 employees (a "Mid-Sized Business"); and
  • Industry Program: A program under which the US Treasury will provide direct assistance via loans and loan guarantees to passenger air carriers and related businesses, cargo air carriers, and businesses critical to maintaining national security.

It is possible for a company to receive financial assistance under multiple programs. The programs vary in several important aspects, which we highlight in this alert. Accordingly, we encourage each company to carefully consider the differences between the programs available under the CARES Act to determine which program best suits its respective needs. In furtherance of such consideration, we have attached as Annex I to this alert a matrix that describes the three categories of financial assistance in greater detail.

 

Financing Terms

Interest Rates

Interest rates on loans provided to eligible US businesses through the programs established under the CARES Act (each, a "Cares Act Loan") will be set by the US Treasury Secretary based on the risk associated with the loan and the current average yield on outstanding marketable obligations of the United States of comparable maturity. The US Treasury Secretary has not yet issued guidance with respect to how risk will be assessed or how risk premiums will be set. Attempts to finely assess risk and to set risk premiums in line with market norms and terms may mute the intended effects of the CARES Act. Accordingly, CARES Act Loans are likely to be extended at interest rates that are relatively attractive from the borrower's perspective, particularly in the current market environment.

With respect to CARES Act Loans provided through the Mid-Sized Business Program, no principal or interest will be due and payable for the first six months or such longer period as the US Treasury Secretary may determine. In no event will interest on such CARES Act Loans exceed 2% per annum.

With respect to CARES Act Loans provided through the Industry Program, each loan will be sufficiently secured or have an interest rate that reflects the risk of the loan or loan guarantee and, to the extent practical, is not less than the rate on comparable obligations prior to the outbreak of COVID-19.2

Repurchases of Equity Securities

The programs restrict the ability to repurchase equity securities. A recipient of a CARES Act Loan through the General Programs will be prohibited from repurchasing an equity security issued by such recipient or its parent company and listed on a national securities exchange,3 except to the extent required under a contractual agreement already in place as of March 27, 2020, until 12 months after such CARES Act Loan is no longer outstanding. A recipient of a CARES Act Loan through the Mid-Sized Business Program will be prohibited from repurchasing an equity security issued by such recipient or its parent company and listed on a national securities exchange, except to the extent required under a contractual agreement already in place as of March 27, 2020, only while such CARES Act Loan remains outstanding.4 A recipient of a CARES Act Loan through the Industry Program is further restricted, as the recipient's affiliates are also prohibited from repurchasing the applicable equity securities until 12 months after such CARES Act Loan is no longer outstanding. Companies may still be able to repurchase privately placed equity securities from the holders thereof because those securities are not listed on a national securities exchange. Accordingly, unless the programs or facilities put in place otherwise restrict share repurchases, the restriction on repurchases of equity securities is unlikely to be a material factor in the consideration of whether a US subsidiary of a European company should apply for a CARES Act Loan.5

Dividends, Capital Distributions and CARES Act Loan Proceeds

A recipient of a CARES Act Loan through the General Programs or the Industry Program will be prohibited from paying dividends or making other capital distributions until 12 months after such CARES Act Loan is no longer outstanding. By contrast, a recipient of a CARES Act Loan through the Mid-Sized Business Program will be prohibited from paying dividends only while such CARES Act Loan remains outstanding.6 In addition, guidance from the US Treasury or the Federal Reserve or credit documentation governing CARES Act Loans may contain additional provisions aimed at restricting the flow of CARES Act Loan proceeds to foreign jurisdictions (e.g., limitations on loans to foreign affiliates). Restrictions on dividends and other capital distributions or the flow of CARES Act Loan proceeds may present a significant challenge for organizational structures in which a European company depends upon the regular receipt of cash from its US subsidiary. Accordingly, they should be noted and discussed with legal and tax advisors prior to applying for a CARES Act Loan.

Employment Matters

A recipient of a CARES Act Loan through the General Programs will not be subject to restrictions on its management of human resources.

A recipient of a CARES Act Loan through the Mid-Sized Business Program will be subject to a number of restrictions on its management of human resources. Specifically, each Mid-Sized Business must certify that (i) loan proceeds will be used to retain at least 90% of its workforce, at full compensation and benefits, until September 30, 2020; (ii) it will restore not less than 90% of its workforce that existed as of February 1, 2020 (i.e., rehire recently laid off workers) and restore all compensation and benefits to such workforce no later than four months after the termination date of the COVID-19 public health emergency; and (iii) it will not outsource or offshore jobs for the term of the loan and two years after the repayment of the loan.78 In addition, a recipient of a CARES Act Loan through the Mid-Sized Business Program must agree not to abrogate any existing collective bargaining agreement for the term of the loan and two years after the repayment of the loan and to remain neutral in any union organizing effort for the term of the loan. The restrictions related to employment matters for CARES Act Loans under the Mid-Sized Business Program are significant. For a European company with a US subsidiary that is a Mid-Sized Business that plans to reallocate production among its subsidiaries in the near-term, or that routinely does so, the certification that it will not outsource or offshore jobs deserves particular attention. The European company's level of interest in reallocating production may dictate from which program under the CARES Act, if any, its US subsidiary seeks assistance.

A recipient of a CARES Act Loan through the Industry Program will be required, until September 30, 2020, to maintain its employment levels as of March 24, 2020, to the extent practicable, and, in any case, will not be entitled to reduce its employment levels by more than 10 percent from the March 24, 2020 levels. For a European company with a US subsidiary that has considered reducing personnel within its US subsidiary for any reason, the restrictions on the reduction of employment levels deserves consideration. The business need for the staff reduction may dictate from which program under the CARES Act, if any, the US subsidiary seeks assistance.

Compensation

Under the CARES Act, during the term of a CARES Act Loan and for one year after its repayment, a recipient of a CARES Act Loan obtained through any program will be subject to several restrictions with respect to the compensation of its officers and highly compensated employees. First, no officer or employee whose total compensation exceeded $425,000 in 2019 may receive (i) total compensation during any 12 consecutive months that exceeds his or her total compensation in 2019, or (ii) severance pay or other benefits upon termination of employment in excess of twice his or her total compensation in 2019. Second, no officer or employee whose total compensation exceeded $3 million in 2019 may receive total compensation during any 12 consecutive months in excess of $3 million + 50% of the excess over $3 million of his or her total compensation in 2019. Under the CARES Act, "total compensation" includes salary, bonuses, awards of stock, and other financial benefits provided by an eligible business to an officer or employee of the eligible business. The CARES Act does not indicate whether only compensation paid by a recipient of a CARES Act Loan (i.e., a US subsidiary of a European company) will be considered part of "total compensation" or whether compensation paid by affiliates of such recipient will be considered as well.9 Additional guidance from the US Treasury or the Federal Reserve may address this point, which will be helpful in structuring compensation within the organizational structure of a European company with a US subsidiary.

 

Next Steps

The CARES Act is intended to provide financial assistance to US businesses affected by the COVID-19 pandemic. We anticipate that the US Treasury and the Federal Reserve will work quickly to establish the programs under which such financial assistance will be provided. Once the programs are operational, we anticipate that there will be very high demand for the funds available under the CARES Act. Accordingly, businesses interested in obtaining financial assistance under one of the CARES Act programs should begin working with legal, tax, and other advisors now so that they may quickly determine which, if any, of the CARES Act programs best suits their needs, apply for assistance through that program when it becomes operational in the days ahead, and structure their business activities going forward in a manner that ensures compliance with the terms of the CARES Act.

 

Annex I

CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT TITLE IV—ECONOMIC STABILIZATION AND ASSISTANCE TO SEVERELY DISTRESSED SECTORS OF THE UNITED STATES ECONOMY SECTIONS 4001 – 4004

Title IV of the Coronavirus Aid, Relief, and Economic Security (CARES) Act sets forth $500 billion of funding for certain industries that have been severely impacted by COVID-19. Those industries are entitled to direct loans and loan guarantees from the US Treasury amounting to $46 billion. The remaining $454 billion of funding is to be used by the US Treasury for a combination of direct lending and guarantees and to support lending programs through bank or non- bank lenders. The various approaches are described and compared below. The Secretary of the Treasury has significant discretion to determine the form and the terms and conditions including covenants, representations, warranties and other requirements.

 

Direct Loans, Loan Guarantees and Investments by the US Government 

Other Businesses 

Direct Loans, Loan Guarantees and Investments by the US Government 

Program for Mid-Sized Businesses 

Eligible Recipients

 

(1) Passenger air carriers and related businesses10 ($25 billion)

(2) Cargo air carriers ($4 billion)

(3) Businesses critical to maintaining national security ($17 billion)

§4003(b)(1)-(3) 

 

Other eligible businesses, states or municipalities ($454 billion + any amounts unused by Distressed Businesses). §4003(b)(4)

Eligible business is very broadly defined to include a United States business that has not otherwise received adequate economic relief in the form of loans or loan guarantees provided under this Act.

 

Businesses (including non-profits) with between 500 and 10,000 employees (a "Mid-Size Business"). §4003(c)(3)(D) 

Program

Direct loans and loan guarantees.

§4003(b)(1)-(3) 

Indirectly via loans, loan guarantees and other investments in programs and facilities established by the Fed to provide liquidity to the financial system that supports lending to eligible businesses, states or municipalities. §4003(b)(4). One such program specified in the Act is for Mid- Sized Businesses. 

The US Treasury shall seek to implement a program to provide financing to banks and other lenders that make available low interest loans to Mid-Sized Businesses for which no principal or interest is payable for the first six months or such longer period as the US Treasury Secretary determines. §4003(c)(3)(D) 

Process

 

US Treasury Secretary may establish vehicles to purchase, hold, sell assets and issue obligations; issue regulations and guidance to carry out these provisions; designate financial institutions, including depositories, brokers, dealers, and other institutions, as financial agents of the United States. §4003(f)/(g) 

Procedures with respect to Distressed Businesses will be promulgated by the US Treasury Secretary within 10 days after enactment. §4003(c)(1)(B) 

 

 

Interest Rate / Security

Will be based on the risk and the current average yield on outstanding marketable obligations of the United States of comparable maturity. §4001(c)(1)(A) 

No higher than 2% per annum. §4003(c)(3)(D) 

Either (1) sufficiently secured, or (2) with an interest rate that reflects the risk of the loan or loan guarantee and, to the extent practical, is not less than the rate prior to the outbreak of COVID-19. §4003(c)(2)(C) 

   

Term

As short as practicable and no more than 5 years. §4003(c)(2)(D) 

   

Government Ownership Interest 

Either a warrant or equity interest (in the case of an entity with securities listed on a national securities exchange) or a warrant, equity interest or senior debt security (in the case of an entity without securities listed on a national securities exchange). §4003(d)

See Annex A for more information.

   

Conditions

Credit is not reasonably available at the time of the transaction. §4003(c)(2)(A)

Intended obligation is prudently incurred. 

§4003(c)(2)(B)

The eligible business must have incurred or is expected to incur losses related to COVID-19 such that the continued operations of the business are jeopardized, as determined by the Secretary. §4003(c)(2)(I)

 

The Mid-Sized business must certify that uncertainty of economic conditions as of the date of the application makes necessary the loan request to support the ongoing operations of the recipient. §4003(c)(3)(D)(I)

The Mid-Sized business must certify that it is not a debtor in a bankruptcy proceeding. 

§4003(c)(3)(D)(V) 

 

The business (1) is created or organized in the United States or under the laws of the United States, (2) has significant operations in the United States, and (3) has a majority of its employees based in the United States. §4003(c)(2)(H), §4003(c)(3)(C), §4003(c)(3)(D)(IV)/(VII)11

Repurchases

Repurchase of an equity security listed on a national securities exchange is prohibited by the Distressed Business and its affiliates12 until 12 months after the date the loan or loan guarantee is not outstanding except to the extent required under an existing contractual obligation. §4003(c)(2)(E)13

Same restriction as Distressed Businesses but without a prohibition on repurchase by affiliates.

§4003(c)(3)(A)(ii)(I) 

Dividends / Distributions

Payment of dividends or other capital distributions is prohibited until 12 months after the loan or loan guarantee is not outstanding. §4003(c)(2)(F), §4003(c)(3)(A)(ii)(II).14

Payment of dividends or other capital distributions by a MidSized Business is prohibited while the loan or loan guarantee is outstanding. §4003(c)(3)(D)(VII).15

RIFs / Furloughs

Until September 30, 2020, the Distressed Business shall maintain its employment levels as of March 24, 2020, to the extent practicable, and in any case shall not reduce its employment levels by more than 10 percent from the levels on such date.

§4003(c)(2)(G)16
 

 

The Mid-Sized Business must certify that funds will be used retain at least 90 percent its workforce, at full compensation and benefits until September 30, 2020. §4003(c)(3)(D)(II)

The Mid-Sized business must certify that it will (1) restore not less than 90 percent of the its workforce that existed as of February 1, 2020, and (2) all compensation and benefits to its workers no later than 4 months after the termination date of the public health emergency declared by the Secretary of Health and Human Services on January 31,2020. §4003(c)(3)(D)(III)

The Mid-Sized Business must certify that it will not outsource or offshore jobs for the term of the loan and 2 years after its repayment.

§4003(c)(3)(D)(VIII) 

     

The Mid-Sized Business must certify that it will not abrogate existing collective bargaining agreements for the term of the loan and 2 years after completing repayment of the loan.

§4003(c)(3)(D)(IX)

The Mid-Sized Business must certify that it will remain neutral in any union organizing effort for the term of the loan. §4003(c)(3)(D)(X) 

Compensation Restrictions

Beginning on the date of the loan through the date that is one year after its repayment:

(1) no officer or employee whose total compensation exceeded $425,000 in 2019 may receive (a) total compensation during any 12 consecutive months that exceeds his or her total compensation in 2019, or (b) severance pay or other benefits upon termination of employment in excess of twice his or her total compensation in 2019.

(2) no officer or employee whose total compensation exceeded $3.0 million in 2019 may receive total compensation during any 12 consecutive months in excess of $3.0 million + 50% of the excess over $3.0 million of his or her 2019 total compensation.

"Total compensation" includes salary, bonuses, awards of stock, and other financial benefits provided by an eligible business to an officer or employee of the eligible business.

§4004817

General Terms 

The principal amount under these programs shall not be reduced by loan forgiveness. §4003(d)(3)

Loans made or guaranteed by the US Treasury shall be treated as indebtedness for purposes of the Internal Revenue Code and shall be treated as issued for its stated principal amount. Stated interest on such loans shall be treated as qualified stated interest. §4003(h)

Conditions

 

Facilities must comply with requirements under Section 13(3) of the Federal Reserve Act (solvent borrowers, loan collateralization, taxpayer protections). §4003(c)(3)(B) 

 

Warrant Terms

The CARES Act requires "Distressed Businesses" (as described above) that have securities listed on a national securities exchange to grant warrants or an equity interest to the US Treasury in connection with loans or loan guarantees. The terms of such warrants remain to be defined by the US Treasury Secretary. The table below sets out the terms of the warrants granted to the US Treasury in 2008 in connection with the Troubled Asset Relief Program (TARP) adopted under the Emergency Economic Stabilization Act of 2008 as a guidelines for possible terms that may be used in connection with the warrants to be granted under the CARES Act. 

 

Troubled Asset Relief Program (TARP)

Coronavirus Aid, Relief, and  Economic Security (CARES) Act

Amount

Warrant to purchase common stock having an aggregate market value equal to 15% of the senior preferred stock investment amount.

If the issuer received aggregate gross proceeds of not less than 100% of the issue price of the senior preferred stock from one or more offerings of perpetual preferred stock or common stock on or prior to December 31, 2009, the number of shares of common stock underlying the warrants then held by the US Treasury shall be reduced by a number of shares equal to the product of (i) the number of shares originally underlying the warrants and (ii) 0.5.

Unknown. Act states the warrants are "designed to provide for a reasonable participation by the Secretary, for the benefit of taxpayers, in equity appreciation."

Exercise Price

The market price for the common stock on the date of the Senior Preferred investment (calculated on a 20-trading day trailing average).

The exercise price shall be reduced by 15% of the original exercise price on each six-month anniversary of the issue date of the warrants if the consent of stockholders described below has not been received, subject to a maximum reduction of 45% of the original exercise price. 

Unknown. The Act states "the exercise price for any warrant issued pursuant to this subsection shall be set by the Secretary, in the interest of the taxpayers."

Term

10 years. No redemption provision.

Unknown.

Exercisability

Immediately, in whole or in part.

Unknown. 

Transferability

Freely transferable except no more than half permitted to be transferred before the earlier of (a) an offering of perpetual preferred stock or common stock raising an amount at least equal to 100% of the preferred stock issue price, and (b) December 31, 2009.

Company to file a resale shelf registration statement for the warrants and underlying common stock as promptly as practicable. 

Company to list the warrants for trading on the same exchange as the common stock.

Unknown. 

Voting

UST agrees not to vote shares underlying common stock.

Same provision in CARES.

Shareholder Consent 

In the event that the issuer does not have sufficient available authorized shares of common stock to reserve for issuance upon exercise of the warrants and/or stockholder approval is required for such issuance under applicable stock exchange rules, the issuer will call a meeting of its stockholders as soon as practicable to increase the number of authorized shares of common stock and/or comply with such exchange rules, and to take any other measures deemed by the UST to be necessary to allow the exercise of warrants into common stock.

Unknown.

Substitution

In the event the issuer is no longer listed or traded on a national securities exchange or securities association, or the consent of the issuer's stockholders described above has not been received within 18 months after the issuance date of the warrants, the warrants will be exchangeable, at the option of the UST, for senior term debt or another economic instrument or security of the QFI such that the UST is appropriately compensated for the value of the warrant, as determined by the UST

Same provision in CARES.

 

1 The CARES Act does not define "significant operations" or state how the "majority of employees" will be calculated. The interpretation of these concepts will need to come from further guidance or a developed practice from the US Treasury or the Federal Reserve. 
2 The CARES Act does not define "sufficiently secured," leaving the determination to the discretion of the U.S Treasury Secretary. We anticipate that this point will be clarified through further guidance or a developed practice from the US Treasury and/or incorporated into the credit documentation governing CARES Act Loans as representations, warranties, covenants and remedies.
3 Under the CARES Act, a "national securities exchange" means an exchange registered as such under the United States Securities Exchange Act of 1934, as amended.
4 Because the Mid-Sized Business Program is part of the broader program under the CARES Act, it is possible that the prohibition under the CARES Act on repurchases of equity securities until 12 months after a CARES Act Loan is no longer outstanding also applies to Mid-Sized Businesses. This conflict may be resolved by means of further guidance from the US Treasury or the Federal Reserve.
5 The restriction described below applying to capital distributions may be interpreted to limit private share repurchases.
6 Because the Mid-Sized Business Program is part of the broader program under the CARES Act, it is possible that the prohibition under the CARES Act on payment of dividends or other capital distributions until 12 months after a CARES Act Loan is no longer outstanding also applies to Mid-Sized Businesses. This conflict may be resolved by means of further guidance from the US Treasury or the Federal Reserve.
7 The CARES Act does not define "outsource" or "offshore." We believe that reallocating production between US and non-US facilities under control of a European parent company would likely be interpreted as offshoring jobs.
8 The CARES Act does not contain an explanation of how these restrictions will be applied or enforced. We anticipate that these restrictions will be clarified through further guidance or a developed practice from the US Treasury or the Federal Reserve and/or incorporated into the credit documentation governing CARES Act Loans as representations, warranties, covenants and remedies.
9 Specific provisions for the Mid-Sized Business Program are silent on the question of compensation restrictions. However, because the Mid-Sized Business Program is part of the broader program under the CARES Act, it is likely that the compensation restrictions will also apply to the Mid-Sized Business Program.
10 Related businesses consist of (i) businesses approved to perform aircraft inspection, repair, replace, or overhaul services under part 145 of title 14 of the Code of Federal Regulations, and (ii) ticket agents which are defined in section 40102 of title 49 of the United States Code as "a person (except an air carrier, a foreign air carrier, or an employee of an air carrier or foreign air carrier) that as a principal or agent sells, offers for sale, negotiates for, or holds itself out as selling, providing, or arranging for, air transportation."
11 §4003(c)(3)(D)(V) confusingly requires a certification that the Mid-Sized Business is an entity or business that is domiciled in the United States with significant operations and employees located in the United States. This is less onerous than the language set out in the table from §4003(c)(3)(D)(VII).
12 Note that the prohibition on repurchases applies to affiliates. This may be difficult to effect unless any such affiliate agrees to the restriction.
13 §4112 – §4117 relates to payroll support for air carriers and contractors. §4114(a)(3) conditions financial support "under this subtitle" on any air carrier or contractor refraining repurchasing any equity security through September 30, 2021 without any exception for existing contractual obligations. We believe this was intended only apply to such an entity that obtains payroll support; however, strictly speaking "this subtitle" includes the loan and loan guarantees program too.
14 §4112 – §4117 relates to payroll support for air carriers and contractors. §4114(a)(3) conditions financial support "under this subtitle" on any air carrier or contractor refraining from paying any dividends or capital distributions through September 30, 2021. We believe this was intended only apply to such an entity that obtains payroll support; however, strictly speaking "this subtitle" includes the loan and loan guarantees program too.
15 Since the Mid-Size Business program is part of the broader program under §4003(b)(4), it is possible that the prohibition under §4003(c)(3)(A)(ii)(II) on payment of dividends or other capital distributions until 12 months after the loan or loan guarantee is not outstanding also applies to Mid-Size Businesses too. We believe that principles of statutory construction would not favor this interpretation since it would result in §4003(c)(3)(D)(VII) which does not have the same 12 month restriction as having no meaning. This will hopefully be resolved by means of guidance from the US Treasury.
16 §4112 – §4117 relates to payroll support for air carriers and contractors. §4114(a)(1) conditions financial support "under this subtitle" on any air carrier or contractor refraining from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020. We believe this was intended only apply to such an entity that obtains payroll support; however, strictly speaking "this subtitle" includes the loan and loan guarantees program too.
17 The Mid-Size Business restrictions in §4003(c)(3)(D) are silent on the question of compensation restrictions, but since the Mid-Size Business program is part of the broader program under §4003(b)(4) we are taking the conservative position here that the cross reference in §4003(c)(3)(A)(ii)(III) to the compensation restrictions in §4004 applies to the Mid-Size Business program. We note, however, §4004 regarding compensation restrictions only refers to §4003(b)(1)(3) related to Distressed Businesses. This seems to imply that at least some of the loans under §4003(b)(4) are not covered by the compensation restrictions. This will hopefully be resolved by means of guidance from the US Treasury. 

 

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