Hotels see loophole in bailout, ask for help with Fed commercial mortgage bonds
“This limit will not allow a business owner to meet both their payroll and debt service obligations beyond an estimate of 4 to 8 weeks,” said the president of the AHLA, Chip Rogers, in a statement. “Therefore, this will result in the very workers being laid off that the bill seeks to protect. Since the measure reduces debt forgiveness with any reduction in payroll, hoteliers would be forced to use the entire loan amount on payroll, at the expense of servicing the debt.
More generally, $ 349 billion may not be enough. Some economists have estimated that Congress should double the forgivable loan program funds to cover small business payrolls for 75 days.
The stimulus package also gives the Treasury Department $ 454 billion to set up credit facilities with the Federal Reserve, which will raise funds in addition to $ 4 trillion in low-interest loans. These loans are meant to help large businesses stay afloat as coronavirus tourniquets cut cash flow, as well as small businesses that may need more than the SBA and private lenders can provide.
On Friday, the AHLA and the Asian American Hotel Owners Association wrote to Treasury Secretary Steven Mnuchin, Fed Chairman Jerome Powell and Securities and Exchange Commission Chairman Jay Clayton, saying they needed the one of these facilities to save the commercial mortgage bond market.
With COVID-19 countermeasures largely shutting down travel, hotel revenues have declined by 70%, according to the letter. If that forces hotels not to pay off their commercial mortgages, they could be foreclosed. And if the $ 300 billion in hotel-backed commercial mortgage-backed securities fail, the problems could spread, like a virus, through the banking industry.