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On May 15, 2020, the U.S. Department of Treasury (Treasury) and U.S. Small Business Administration (SBA) issued the Loan Forgiveness Application for borrowers to complete in order to apply for loan forgiveness under the Paycheck Protection Program Paycheck Protection Program (PPP), as enacted under the Coronavirus Aid, Relief, and Economic Security Act (as amended, supplemented or otherwise modified from time to time, including, without limitation, by the Paycheck Protection Program and Health Care Enhancement Act, applicable federal regulations and interpretive guidance issued by the SBA and Treasury, the CARES Act).  The Loan Forgiveness Application includes a loan forgiveness calculation form and related Schedule A worksheet as well as an optional PPP borrower demographic information form.

Highlights of what we believe to be material new guidance or clarification of existing guidance regarding PPP loan forgiveness are as follows:…
Continue Reading Paycheck Protection Program: Key Features of the Loan Forgiveness Application

In the aftermath of the 9/11 attacks, the Appraisal Institute issued guidance to its MAI appraisers regarding the new challenges and limitations on rendering an opinion of real estate value in the wake of a disaster when markets are unstable or chaotic[1].  The Appraisal Institute identified the specific issues and assumptions that affect the appraiser’s ability to employ accepted standards and practices of valuation, going so far as to advise its MAI members that they should not accept assignments that require “competency beyond that of a real estate appraiser,” id., essentially saying that there can be so much uncertainty that MAI appraisers could not render an opinion compliant with accepted standards.  Given that Bankruptcy Courts require credible and admissible evidence of value at several stages of the Chapter 11 process, the absence of persuasive and credible evidence of value means that the party with the burden of proof on the specific valuation issue will fail to carry its burden and should be denied whatever relief  or outcome that  is being sought, perhaps affecting the outcome of the entire Chapter 11 case.  This article summarizes the challenges faced by bankruptcy judges and practitioners in this post-COVID-19 climate of uncertain real estate values. …
Continue Reading Post-COVID-19 Appraisals And The Burden Of Proof In Bankruptcy Cases

On May 13, 2020, the U.S. Department of Treasury (Treasury) and U.S. Small Business Administration (SBA) issued an updated Frequently Asked Questions fact sheet (FAQ)[1], which provides interpretative guidance on the Paycheck Protection Program (PPP), as enacted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).[2]…
Continue Reading Paycheck Protection Program: SBA Issues Further Guidance on its Review of the Economic Uncertainty Certification made by PPP Borrowers

The U.S. Department of Treasury (Treasury) and U.S. Small Business Administration (SBA) issued further interpretative guidance on the Paycheck Protection Program (PPP), as enacted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), via (i) an updated Frequently Asked Questions fact sheet (FAQ)[1], which was last published on May 6, 2020 and (ii) the distribution of the Eighth Interim Final Rule[2] on May 5, 2020.[3]…
Continue Reading Paycheck Protection Program: SBA Extends Prepayment Safe Harbor To May 14, 2020 and Issues Further Interpretive Guidance on Employee Head Count and Affiliation

On Thursday April 30, 2020, the Board of Governors of the Federal Reserve Board released a new revised term sheet for the Paycheck Protection Program Liquidity Facility (“PPPLF”).  Under the facility, the Federal Reserve Banks will lend to eligible borrowers on a nonrecourse basis, taking loans to small businesses guaranteed by the Small Business Administration (“SBA”) under the Paycheck Protection Program (“PPP Loans”) as collateral.  …
Continue Reading Update on the Paycheck Protection Program Liquidity Facility

On April 30, 2020, the U.S. Small Business Administration (SBA) issued its Seventh Interim Final Rule[1] with respect to the Paycheck Protection Program (PPP), as enacted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).[2]…
Continue Reading Paycheck Protection Program: SBA Issues an Aggregate $20 Million Limit for Entities within a “Single Corporate Group”

On April 28, 2020, U.S. Department of Treasury (Treasury) Secretary Steven T. Mnuchin and U.S. Small Business Administration (SBA) administrator Jovita Carranza issued a Joint Statement stating that a “review” will be conducted for businesses seeking loan forgiveness for loans in excess of $2 million under the Paycheck Protection Program (PPP), as enacted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  Treasury Secretary Mnuchin and SBA administrator Carranza added that “regulatory guidance implementing this procedure will be forthcoming.” …
Continue Reading The SBA and U.S. Treasury Announce Full “Review” of Businesses Receiving PPP Loans Greater than $2 Million

On April 24, 2020, the U.S. President signed into law the Paycheck Protection Program and Health Care Enhancement Act (PPP Enhancement Act), which appropriates an additional $321 billion for the Paycheck Protection Program (PPP), as enacted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  The $321 billion infusion under the PPP Enhancement Act replenishes the PPP after the program utilized the entire $349 billion commitment that was originally authorized under the CARES Act.  Of the $321 billion, the SBA is obligated to set aside and guarantee $30 billion for (i) insured depository institutions with consolidated assets between $10 billion and $50 billion and (ii) credit unions with consolidated assets between $10 billion and $50 billion, and another $30 billion for (i) community financial institutions, (ii) insured depository institutions with consolidated assets of less than $10 billion and (iii) credit unions with consolidated assets of less than $10 billion.
Continue Reading Enactment of the Paycheck Protection Program And Healthcare Enhancement Act and Further Interpretive Guidance on The Economic Uncertainty Certification And PPP Eligibility

The Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) guarantees loans from qualified lenders to small businesses impacted by the COVID-19 pandemic so that those businesses can keep workers employed.  In the Third Interim Final Rule issued on April 20, 2020 (see 85 Fed. Reg. 21747), the SBA cleared the way for members of Federal Reserve Banks (“FRB”) and Federal Home Loan Banks (“FHLB”) to pledge PPP loans to secure borrowings by excluding the FRBs and FHLBs from the pledge requirements typically applicable to SBA 7(a) loan pledges.  The exclusion of such pledges from the otherwise applicable requirements means that the SBA does not have to provide prior consent to such pledges nor will it have to approve the FRB and FHLB loan documents or require a multi-party agreement among SBA, the lender, and others. …
Continue Reading Federal Reserve Banks and Federal Home Loan Banks May Accept Pledges of PPP Loans as Collateral

Among the only certainties for the post-COVID lending world is the uncertainty of commercial real estate values.  Among the classes of real estate that surely will be immediately diminished in value are hospitality and most brick and mortar retail, but even the value of industrial and office properties will be closely scrutinized as questions are posed regarding changes in how companies conduct their businesses and which types of businesses will recover most fully.  Ignoring the obvious challenges faced by hotels, stores, movie theaters and restaurants, will office buildings ever re-fill with white collar workers after they have demonstrated an ability to work remotely?  Which factories will spring back to full productivity, and how will the demand for work space change?  And most fundamentally to real estate lenders and investors, what will happen to rental and sale values in the face of this uncertainty?  These questions will have an immediate impact on the Chapter 11 process and will provide opportunities for business debtors to drastically reduce and modify liabilities secured by real estate.  Real estate lenders in turn may have to resort to the often-misunderstood provisions of the Bankruptcy Code found in Section 1111(b) dealing with under-secured real estate loans.    …
Continue Reading Election Time: Bankruptcy Code 1111(B) in the Post-COVID World