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Home New Cases Trustee Alleges $20M PPP Loan Repay Is Per Se Not Ordinary

Trustee Alleges $20M PPP Loan Repay Is Per Se Not Ordinary


Download the full pdf of the complaint by clicking: here

June 29, 2022, US Bankruptcy Court for Southern Texas – NPC International GUC Trust (“Trust”) brings a lawsuit against INTRUST Bank, N.A. (“Defendant”) to avoid and recover alleged preferential transfers and to disallow any claims held by Defendant.

The complaint provides the following background for its claims:

On April 15, 2020, Debtors, NPC International, Inc (“NPCI”) and NPC Quality Burger, Inc., (NPCQB”) each as borrowers, entered into two separate $10 million promissory notes (the “PPP Loans”) with Defendant Bank pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). 

The first payment of principal and interest for the PPP Loans was due on October 15, 2020, with monthly payments thereafter.

On May 7, 2020, Debtors NPCI and NPCQB contacted Defendant, requesting instructions on how to early pay the PPP Loans. Pursuant to that request, Defendant calculated the accrued interest on each loan up to that date. Defendant indicated that the payoff amount for each of the two loans was $10,006,111.11, with a per diem of $277.78. 

On May 7, 2020, Debtors NPCI and NPCQB each wired $10,006,111.11 to the Defendant with combined payments totaling $20,012.222.22.

On July 1, 2020, the Debtors filed for a Chapter 11 bankruptcy. 

The Trust alleges that Debtors transfer of more than $20 million was in fact transfer of an interest of their respective property to or for the benefit of Defendant during the preference period.

The Trust rejects availability of the defense of “ordinary course of business” claiming that the PPP Loans were not ordinary business loans but were available under CARES Act in response to a national crisis caused by the COVID-19 pandemic. The Trust also denies the existence of a “new value” defense asserting that it is unaware of any goods, services or new credit provided to the Debtors by Defendant after their repayment. The Trustee therefore seeks to avoid and recover these transfers as preference pursuant to 11 U.S.C. §§ 547 and 550(a).

NPC International GUC Trust v. INTRUST BANK, N.A. (In re NPC International, Inc.), AP No. 22-3214, US Bankruptcy Court for the Southern District of Texas.


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