Business Borrowers Protection Act

I 116TH CONGRESS 2D SESSION H. R. 6790 To prohibit the enforcement of certain loan covenants during the COVID– 19 national emergency, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MAY 8, 2020 Mr. SHERMAN (for himself and Ms. WATERS) introduced the following bill; which was referred to the Committee on Financial Services A BILL To prohibit the enforcement of certain loan covenants during the COVID–19 national emergency, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Business Borrowers 4 Protection Act’’. 5 SEC. 2. ENFORCEMENT OF LOAN COVENANTS. 6 (a) LOANS RECEIVED UNDER COVID–19 RELIEF 7 PROGRAMS.—Any loan that a borrower receives under a 8 COVID–19 relief program may not be taken into ac- 9 count— 10 VerDate Sep 11 2014 18:46 May 21, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H6790.IH H6790 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 6790 IH (1) in determining whether— 1 (A) the borrower is in violation of any loan 2 covenant of a covered loan; or 3 (B) a lender may accelerate the due date 4 of any covered loan agreement; or 5 (2) in calculating the debts or liabilities of the 6 borrower for purposes of determining whether such 7 borrower is in conformity with any covered loan 8 agreement. 9 (b) LOAN COVENANTS NOT ENFORCEABLE DURING 10 COVID–19 NATIONAL EMERGENCY.— 11 (1) IN GENERAL.—A lender may not enforce 12 any loan covenant during the period beginning on 13 the date of enactment of this Act and ending on the 14 day that is 1 year after the termination of the na- 15 tional emergency declared by the President on 16 March 13, 2020, under the National Emergencies 17 Act (50 U.S.C. 1601 et seq.) relating to the 18 COVID–19 pandemic. 19 (2) RULEMAKING.—Not later than the end of 20 the 60-day period beginning on the date of enact- 21 ment of this Act, the Secretary of the Treasury shall 22 issue such regulations and guidance as may be nec- 23 essary to ensure that any lender who complies with 24 the requirements described in paragraph (1) is not 25 VerDate Sep 11 2014 18:46 May 21, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H6790.IH H6790 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 6790 IH deemed to be in violation of any law or regulation 1 relating to the enforcement of loan covenants. 2 (c) TRUSTEE OR PERSON WITH FIDUCIARY DUTY 3 NOT LIABLE.— 4 (1) IN GENERAL.—No trustee or other person 5 with a fiduciary duty to the holders of any debt se- 6 curity shall be liable for any decision made not to 7 enforce a loan covenant related to such debt secu- 8 rity. 9 (2) APPLICABILITY.—Paragraph (1) shall only 10 apply during the period beginning on March 12, 11 2020, and ending on March 13, 2022. 12 (d) DEFINITIONS.—In this Act, the following defini- 13 tions apply: 14 (1) COVERED LOAN.—The term ‘‘covered loan’’ 15 means a loan entered into on or before the date of 16 the enactment of this Act. 17 (2) COVID–19 RELIEF PROGRAM.—The term 18 ‘‘COVID–19 relief program’’ means any program 19 created by— 20 (A) the Coronavirus Preparedness and Re- 21 sponse Supplemental Appropriations Act, 2020 22 (Public Law 116–123); 23 (B) the Families First Coronavirus Re- 24 sponse Act (Public Law 116–127); 25 VerDate Sep 11 2014 18:46 May 21, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H6790.IH H6790 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 6790 IH (C) the CARES Act (Public Law 116– 1 136); or 2 (D) the Federal Government or any State, 3 local, Tribal, or territorial government for the 4 purpose of reducing the financial losses of busi- 5 nesses caused by the spread of COVID–19. 6 (3) LOAN COVENANT.—The term ‘‘loan cov- 7 enant’’ means any provision in a covered loan agree- 8 ment that allows or requires the acceleration of re- 9 payments due under any loan agreement or that re- 10 duces the availability of funds under a line of cred- 11 it— 12 (A) due to any act or omission of a bor- 13 rower or any entity related to the borrower; or 14 (B) because the total liabilities or current 15 liabilities of a borrower exceed— 16 (i) any benchmark; or 17 (ii) any percentage of the assets of the 18 borrower, revenues, equity, or any other 19 benchmark. 20 Æ VerDate Sep 11 2014 18:46 May 21, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6301 E:\BILLS\H6790.IH H6790 pamtmann on DSKBC07HB2PROD with BILLS