11 LI public companies snagged $36 million in PPP loans: SEC records

Eleven public companies on Long Island have secured Paycheck Protection Program loans totaling more than $36 million and sustaining the salaries of about 2,200 workers, according to a Newsday review of securities filings.

Some of the companies are still operating because they make essential products such as coronavirus diagnostic tests, scientific equipment and components for military aircraft. Forty-five percent made money last year and 55% did not.

The group’s PPP loans averaged $3.3 million. That's more than 13 times the average of $250,949 for 81,075 loans awarded in New York State as of April 16, according to the U.S. Small Business Administration. The agency couldn't provide data for Long Island.

The disparity between the loan amounts for public companies and small Main Street businesses has sparked criticism in Nassau and Suffolk counties and across the country.

"You have all of these large companies that got millions of dollars in loans, but this [the coronavirus business shutdown] isn't going to lead them to go out of business," said Bob Waldeck, president of RATCO Inc., a Holbrook manufacturer of replacement frames for vintage Triumph sports cars. "For little guys, like us, it's very likely that six months from now we won't be around. And the PPP and other loan programs were meant to prevent small businesses from going under. It's very frustrating," he said.

After waiting for weeks, Waldeck reported Monday that he received a $9,500 PPP loan in his bank account.

The outcry led U.S. Treasury Secretary Steven Mnuchin on April 23 to advise public companies to repay their PPP loans by Thursday or face “severe consequences.” The loans are backed by more than $650 billion in federal loan guarantees.

Mnuchin's warning was heeded by Nathan’s Famous Inc. in Jericho.

The hotdog purveyor, in a filing last week, said it “has determined to repay and return the entire amount of the PPP loan to the lender.” The loan was $1.2 million to support about 150 jobs.

Nathan’s, which began as a nickel hotdog stand on Coney Island, Brooklyn, reported a profit of $21.5 million last year on revenue of $102 million. It has a stock market value of $242 million.

Seven of the PPP loans to Long Island’s public companies were made by JPMorgan & Chase Co. and HSBC Bank USA, both in Manhattan, and BNB Bank Inc. in Bridgehampton.

“There have been isolated instances where companies have been identified as incompatible with the implied objectives of the PPP initiative,” said BNB CEO Kevin O’Connor. “However, the SBA did not specifically exclude public companies in the legislation, so the granting of loans to these companies was appropriate at the time.”

He added, “If the companies in question pursuant to public pressure decide to change their view of this financing, we will accommodate them.” The loans to public companies represent less than 1% of the almost $900 million in PPP loans made by the bank as of April 16.

BNB loaned $3 million to P&F Industries Inc. and $4.8 million to CPI Aerostructures Inc.

P&F CEO Richard Horowitz said the money was key to “maintain our workforce while we manage through this crisis and continue to manufacture and distribute our products…. many of which are critical to the ongoing operation of many essential and life sustaining industries.”

The Melville manufacturer of power tools has 195 employees and reported a profit of $4.9 million last year on sales of $58 million. It has a stock market value of $14 million.

CPI Aero is using its PPP loan “to operate without layoffs or furloughs as a Department of Defense-designated ‘critical infrastructure’ company,' ” said CEO Doug McCrosson. “With this assistance, we expect to emerge from this crisis with our workforce intact and the capability to execute on our substantial backlog” of orders for aviation components.

The Edgewood company has 281 employees and reported a profit of $2.2 million last year on revenue of $84 million. It has a stock market value of $39 million.

The PPP consists of banks and other private lenders making loans of up to $10 million, generally to businesses with 500 or fewer employees. The interest rate is 1% with a two-year term and the entire amount is forgivable in some instances. Newsday has secured a $10 million loan.

The federal CARES Act, which created the PPP, didn’t include oversight measures so public companies “were given a free pass to suck the program’s funding dry as many small businesses walked away with little to nothing,” said Kyle Herrig, president of the government watchdog group Accountable.US in Washington.

Loan amounts are based on a company’s headcount and payroll expenses – the more employees, the larger the loan – because the purpose is to prevent layoffs for two months.

The largest loan to an LI public company, $6.7 million, went to TSR Inc., which is weighing whether to use the money.

The IT staffing company in Hauppauge has 389 employees, of which 340 are W-2 contractors, which means they work for a TSR customer but are paid by TSR.  If they were 1099 independent contractors, they couldn’t be paid using PPP funds, according to SBA officials.

“When we saw the wave of shutdowns and work stoppages coming, we decided to apply for the Paycheck Protection Program because we want to preserve our workforce,” said CEO Thomas Salerno. “I cannot give you an answer on how or even if we are going to use it. We’re trying to assess what’s going to happen over the next few months and long term,” he said.

Salerno, who became CEO as the coronavirus struck Long Island, said some TSR employees are unable to work and others are working remotely because of the shutdown of nonessential activities to reduce the virus’ spread. The company hasn’t laid off or furloughed workers, he said.

TSR reported a loss of $1.3 million last year on revenue of $63 million. It has a stock-market value of about $7 million.

“This is the equivalent of a humanitarian effort,” Salerno said, referring to the PPP. “I want to protect our employees and shareholders and keep TSR solvent and running – but if we don’t use the PPP funds we will follow the letter of the law” and repay the loan.

The anger of small business owners is directed more toward banks than the public companies that they said took advantage of lax regulations.

At his 3,000-square-foot automotive body shop, Waldeck said the federal government needs to pressure lenders to make more PPP loans to small businesses like his one-person firm.

While his loan came through, Waldeck said, "the banks are ignoring the small businesses."  Once the banks received the loan guarantees, "they turned around and gave loans to their friends at the big corporations because it benefited them," he said. "They are ignoring the small people who are going to end up going out of business because of this."

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.