Kura Sushi, the U.S. restaurant chain that is majority owned by a Japanese company, said on Wednesday that it would be returning the $5.98 million loan it recently received through the federal government’s Paycheck Protection Program.
Kura Sushi is the second publicly traded restaurant chain to return money it received from the emergency small business financial effort being run by the Small Business Administration. Shake Shack said earlier this week that the burger chain would be giving back the $10 million it secured through the program.
The move by Kura Sushi will likely put more pressure on other restaurant chains and larger enterprises that have received funding through the Paycheck Protection Program.
On Tuesday, Treasury Secretary Steven Mnuchin expresses satisfaction that Shake Shack was returning its emergency loan proceeds and urged other larger publicly traded companies to follow its lead. He said that the SBA would be issuing new guidance on the certifications that borrowers made under the program, suggesting some companies may find themselves in a position of breaching the certification.
“There is a certification that people are making and I ask people just make sure the intent of this was for business that needed the money … the intent of this money was not for big public companies that have access to capital,” Mnuchin said. “If you pay back the loan right away you won’t have liability to the SBA and to Treasury but there are severe consequences for people who don’t attest properly to this certification.”
The $349 billion Paycheck Protection Program ran out of money last week before many small businesses in America were able to tap it for emergency funding. The funds that Kura Sushi and Shake Shack are returning cannot be used to make new small business loans unless Congress authorizes new funds for the Paycheck Protection Program. The Senate on Tuesday approved a $484 billion package that would replenish the program and the House is expected to take up the legislation on Thursday.
The small business emergency funding program offers two-year loans of up to $10 million, with the principal forgivable if the proceeds are largely used for payroll and to keep people employed. While the loans are meant for small business with fewer than 500 employees, some restaurant chains that did not employ more than 500 people at a single location were allowed to obtain the loans.
Some of the public companies that were able to tap the program had market capitalizations greater than $100 million and seemed to have other financing options. Shake Shack, for example, conducted a $150 million share offering on Friday. Other restaurant chains that received funding from the program include J. Alexander’s Holdings, which obtained two separate loans totaling $15.1 million, and Ruth’s Hospitality Group RUTH , which operates the Ruth’s Chris Steak House chain and got $20 million through two different subsidiaries.
Kura Sushi had $30 million of cash and cash equivalents on hand as of the end of February, Securities & Exchange Commission filings show. Kura Sushi, which is based in Irvine, Calif., was established in 2008 as a subsidiary of a Japanese sushi restaurant chain that goes by the same name. Kura Sushi is listed on the Nasdaq NDAQ and operates 23 restaurants across five states. Its initial Japanese parent company still owns more than 50% of the company.
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