The deal is the first in a $ 17 billion loan program approved as part of the larger congressional relaunch in March. This sum of money was reserved for companies deemed “essential” to the national security of the United States. Congress has given the Treasury the power to approve more than $ 500 billion in emergency loans to businesses and cities, although most of that money has not been disbursed.

“We are pleased that the Treasury has granted this loan in accordance with the CARES Act,” Secretary Steven Mnuchin said in a statement. “This loan will allow a key supplier to the Department of Defense to retain important employment while providing appropriate compensation to taxpayers.”

YRC Worldwide is a publicly traded company headquartered in Kansas. With a fleet of approximately 7,600 tractors and 30,000 trailers, YRC is one of the largest “less-than-truck” haulage companies in North America. The 96-year-old company covers 68% of the military’s services in this area, according to the Treasury Department announcement.

The investment could intensify questions about the Treasury’s handling of hundreds of billions of dollars in taxpayer assistance at a pivotal time for the US economy. Some critics said the Treasury interventions amounted to a big business bailout for companies that didn’t deserve it, while others argued that the money should be distributed more quickly with fewer conditions to avoid a rise in the price. unemployment. The Treasury did not spend any of the $ 17 billion for more than three months, which raised questions about the program’s effectiveness as companies sought other means of financing.

The Cares Act requires companies receiving assistance through the fund to give the government an equity stake or a warrant, a financial instrument that allows the lender to claim shares at a later date.

Wes Hallman, vice president of the National Defense Industrial Association, said he was aware of about 20 companies that had applied for help through the fund, a relatively small number for a massive and sprawling industry. . Most defense contractors felt the conditions were too onerous, defense executives and lobbyists told the Washington Post.

“There are too many bells and whistles going in the wrong direction, and the big aerospace companies are just not interested” in the fund, said Arnold Punaro, a retired Marine Corps general who works as a consultant in the fund. defense. “If it was a good deal for our aerospace companies, they would use it.”

Although many companies were financially desperate as the crisis worsened in late March and early April, many have found other options. Many defense contractors have found relief through other Cares Act programs. A handful of defense providers have received Small Business Administration-guaranteed Paycheck Protection Program loans, which have no equity requirements and have the option of being canceled.

The Ministry of Defense is spending $ 668 million in Defense Production Act funding on the defense industrial base. This financing is granted through existing open contracts which do not have to be renegotiated and do not require any equity participation.

As capital markets improved in April and May, some companies found other options in the private markets.

“When the Cares Act was passed, most defense companies viewed the program as an option, but most determined that the terms associated with the loan program were so restrictive as to make it difficult to obtain capital. other means a better option, ”said Jeff Green, a lobbyist. who works with several defense companies who have considered applying.

One company that has passed on government aid is Boeing, the battered aerospace manufacturer and defense contractor whose finances have been shattered by the global downturn in commercial air travel. Mnuchin and those involved in drafting the Cares Act said the $ 17 billion pot was initially intended largely to support Boeing. However, the company has been able to raise sufficient funds to stay afloat in the private credit markets, which have been aided by the extraordinary measures of the Federal Reserve, although the company also laid off thousands of workers.

According to a Treasury statement, the loan will allow YRC to retain approximately 30,000 trucking jobs and “continue to support critical military supply chain operations” used by more than 200,000 companies in North America. The ministry also cited a certification from the Secretary of Defense on YRC’s critical value for national security. The deal includes limits on executive compensation and dividend payments to shareholders, but the Treasury has not disclosed what these are.

Like most transportation companies, YRC was hit hard by state-to-state business closures that stagnated the national economy in March and April. The company ended the first quarter of 2020 with $ 1.15 billion in revenue, down slightly from the same period last year. The decline in the volume of its commercial freight business has reduced the company’s results, forcing layoffs and other cost-cutting measures. But corporate debt is a bigger concern; YRC owes $ 825 million to various creditors, according to its latest financial statement.

In a May 5 phone call with analysts, YRC chief executive Darren Hawkins thanked employees for keeping America’s supply chain moving despite the “invisible enemy,” echoing a term commonly used by President Trump. He declined to answer analysts’ questions, marking a significant departure from usual practice.

“I don’t know of a more patriotic industry than trucking, and that spirit has remained strong in American transportation systems,” Hawkins said.

In a press release, Hawkins thanked Congress and the Treasury Department for providing financial assistance to help YRC weather the crisis. “This financial assistance will allow us to overcome this pandemic crisis and continue to provide essential shipping services for the nation’s supply chain,” said Hawkins.

While it is unusual for the U.S. government to acquire parts of businesses, such arrangements are common internationally and help governments ensure that taxpayers receive a return on their investment. If the price of YRC shares rises, taxpayers will benefit as well, as a traditional investor would. “During this crisis, the government must not let businesses fail, but neither must it bail out the wealth of their owners. Lending for equity does just that, ”said Matt Bruenig, founder of the Left Popular Politics Project.

The deal is likely to lead to criticism of US taxpayers providing special assistance to businesses that should not receive assistance. Darrick Hamilton, a professor at Ohio State University, noted that emergency aid comes as protesters in major US cities call for cuts to police and military spending. The US government already provides more than $ 700 billion a year to the military.

“The government is supposed to take care of welfare, but it spends money on militarization and policing,” Hamilton said. “This is indicative of our general values ​​of where we spend our money.”

Magda Jean-Louis contributed to this report.