The U.S. Small Business Administration opposes Astria Health’s bankruptcy plan, saying $2.7 million in Paycheck Protection Program loans it received in June should be considered a high-ranking claim in its reorganization, WSJ Pro Bankruptcy reported. The SBA said that Astria is claiming that the loans needn’t be repaid. “While a PPP loan may be forgivable under certain circumstances, it is nevertheless a loan, not a grant,” the SBA said on Friday in a filing in U.S. Bankruptcy Court in Yakima, Wash. The Sunnyside, Wash.-based nonprofit health system, which filed for chapter 11 last year, will seek approval of its bankruptcy plan in mid-December. Congress passed the Coronavirus Aid, Relief and Economic Security Act, or Cares Act, in response to the economic devastation caused by the coronavirus pandemic. Its programs include PPP loans. The SBA’s PPP application says that bankrupt companies aren’t eligible for the loans, causing banks to deny their requests. But some legal experts, affected companies and at least two federal judges have said nothing in the Cares Act indicates Congress meant to withhold stimulus funds from troubled companies that have turned to bankruptcy. Some businesses have sued the SBA over the matter. Astria sued the SBA in May and sought a temporary restraining order, asking the court to require the federal agency to consider its PPP application despite the business being in bankruptcy. The SBA opposed the motion. The court in June granted Astria’s motion and a preliminary injunction, and shortly thereafter Astria received the PPP loans. The SBA has appealed.
