A spokesperson for Kathmandu told The Age and The Sydney Morning Herald the company applied for the loans when it closed its stores globally on April 27 when there was “significant uncertainty over the reopening timeframe”.
However, just three days later the company announced it would raise $200 million from its shareholders to bolster its balance sheet and take “pre-emptive action” against COVID-19.
While US government guidelines for the PPP loans do not prevent corporates from claiming the loans, companies are expected to act in “good faith” that the loan is necessary to support ongoing operations.
“Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business,” government guidelines read.
Public companies with “substantial market value and access to capital markets” would be unlikely to make the certification in good faith, the government said. Kathmandu is listed on the Australian and New Zealand stock exchanges with a value of around $720 million. Its shares have risen 56 per cent since late March.
The US’ Small Business Administration (SBA) has warned that companies which it determines lacked an adequate basis for applying for the loans will be required to repay them in full, will not be eligible for loan forgiveness, and could be liable for penalties.
A Kathmandu spokesperson did not indicate if the company has asked for its loans to be forgiven, and defended its application for the PPP scheme, saying its subsidiaries met all eligible criteria.
“As intended by the program, fundings have been used to support employment of otherwise furloughed employees in the USA,” the company said.
Kathmandu has also received JobKeeper payments in Australia and around $4 million in subsidies from the New Zealand government. Other stimulus was received across its European operations, all of which the company said would be recorded in line with accounting standards and disclosed appropriately at its full-year results later this year.
A number of corporates in the US have applied for the PPP loans, prompting widespread criticism of the program’s structuring, with Democrats demanding in May that large corporates with substantial investor bases and access to capital markets who received the loans immediately return the funds.
US Treasury Secretary Steven Mnuchin has conceded it was “unfortunate” and “inappropriate” that some large companies had taken the PPP loans.
Kathmandu did not say if it had repaid, or if it intended to repay, the loans.
Kathmandu is not the only Australian corporate to have received the emergency funding, with the AFR reporting that a slew of buy now pay later operators such as Afterpay, Sezzle and Zip have also accepted the loans.
Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.