Distressed Companies Risk Shut Out From Fed’s Loans
- Old rules may block new money from companies behind on bills
- Legal teams study stimulus law for clues on aid eligibility
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Troubled companies behind on their bills or already in bankruptcy may be out of luck when it comes to getting federal funds from the U.S. stimulus package.
Current law blocks the government from making loans to companies that have either filed for Chapter 11 bankruptcy or fail an insolvency test, according to lawyers who’ve studied the new legislation. In that scenario, it would be nearly impossible for such borrowers to access financing from the Federal Reserve.