April 24, 2020 / 5:17 PM / a month ago

U.S. requires equity stakes from national security firms seeking COVID aid

WASHINGTON (Reuters) - The U.S. Treasury Department will ask for an equity stake in publicly traded national security contractors, including defense firms, that seek part of the $17 billion set aside for them in coronavirus relief funds.

According to a loan application posted on the Treasury website late Thursday, companies with a Top Secret clearance working for the U.S. government and others with contracts related to the defense production act should submit a loan request by May 1.

At a White House briefing on Tuesday, Treasury Secretary Steve Mnuchin said guidance would be out soon on the money earmarked for major Department of Defense suppliers and companies that held a security clearance.

The Pentagon has been working to shore up finances among defense contractors that may have seen a fall-off in non-defense business as quarantining to prevent the spread of the new coronavirus has halted much of the U.S. economy.

The loan application says “each borrower must provide the Treasury Department with appropriate financial instruments.”

Thus far, many defense firms are not interested in taking part of the $17 billion earmarked for national security because the power of these “financial instruments” the government was seeking was not clear, said an executive at a top defense company who spoke on condition of anonymity to preserve ties with the government.

The executive said defense firms were focused on whether Boeing (BA.N) would take the money to prop up its commercial side. Boeing makes products for the Pentagon as well as commercial jetliners, and the cash without guidelines could give the jet-maker an unfair advantage among defense companies.

Earlier this month, Reuters reported Boeing hired investment banks Lazard and Evercore Inc to assess potential U.S. government assistance or private sector loans.

The largest U.S. planemaker asked last month for at least $60 billion in U.S. government loan guarantees for itself and other American aerospace manufacturers to help the embattled industry withstand a coronavirus-related cash drain.

Boeing said Friday it is still “awaiting additional guidance” from Treasury before it decides what action to take.

Reporting by Chris Sanders, David Shepardson and Mike Stone in Washington; additional reporting by David Shepardson; Editing by Steve Orlofsky and David Gregorio

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