The @SBAGov just banned firms in Chapter 11 from accessing the #PPP loan program.

So: No PPP DIP Loans.

The Bankruptcy Code is, like PPP, a set of federal policies for helping distressed businesses. They should be allowed to work together. This is a bad decision.

(1/

Most importantly, a Chapter 11 debtor gets a "pause" from debt collections. That, plus PPP, provides a recipe for firms to survive this crisis that otherwise couldn& #39;t.

For example, a firm could file for a PPP loan, pay employees and get breathing space to reorganize. (2/

The SBA says that Chapter 11 firms are "too risky" to fund. But that is probably wrong, at least some of the time. A firm in Chapter 11 has engaged legal counsel and is focused on turning around its business and developing a plan to do so.

(3/

Note that a firm in Chapter 7 is a different story. That liquidating firm would be unlikely to repay a PPP loan - but does the PPP program really anticipate very much repayment? Isn& #39;t it fine to use a PPP loan to fund severance for a business that can& #39;t survive this crisis? (4/

The federal bankruptcy system is an existing set of policies, institutions and tools that help distressed firms.

The CARES Act should be seen as ADDING to the existing bankruptcy system.

This is a bad call by @SBAgov. (5/5)

h/t @Chapter11Cases for pointing this out! The full link is here:
https://www.sba.gov/sites/default/files/2020-04/Interim-Final-Rule-04%2024%2020.pdf">https://www.sba.gov/sites/def...