Large firms offered millions in loans to stay afloat: PM
OTTAWA -- The federal government is rolling out a new multimillion-dollar loan program aimed at providing financing access to large employers impacted by COVID-19 and the economic downturn it’s prompted.
“These are bridge loans, not bailouts,” said Prime Minister Justin Trudeau during his address to Canadians from Rideau Cottage on Monday.
Called the Large Employer Emergency Financing Facility (LEEFF), the plan will allow big companies to access additional liquidity to keep their operations going, retain workers on payroll, and avoid bankruptcy, though the financing comes with a series of terms and conditions.
The federal government is offering companies across most sectors — including the airline industry — that have “larger financing needs” access to loans.
Eligible companies have annual revenues of $300 million or higher and are seeking financing of $60 million or more. Businesses in the financial sector are not eligible, nor are any firms convicted of tax evasion in the past.
As well, through a business credit availability program, mid-market firms with revenues in excess of $100 million are being offered loans between $12.5 million and $60 million per company, and financial guarantees of up to $80 million.
“Ideally, private-sector lenders are adequate for the needs of large businesses. But in an extraordinary situation when that isn’t always enough, we must act to prevent massive harm to Canadian workers and families, and the Canadian economy,” Trudeau said, going on to state that under this program the government will be “the lender of last resort.”
“We will not allow millions of people to lose their livelihoods, because of unprecedented events beyond their control,” said the prime minister.
Trudeau said the objective of this aid is to keep Canadian companies up and running. He said the government will ensure the aid is accessible to every sector across the country, with the vow that companies are held accountable, including requiring them to share their complete financial structure when applying.
FIRMS NEED 'SIGNIFICANT' WORKFORCE IN CANADA
LEEFF applicants must have “significant operations or workforce in Canada.” Their international situation and financing arrangements will be taken into consideration, and each business will have to demonstrate some degree of environmental commitment and vow to report annually on its climate and sustainability initiatives.
“Different sectors will need the funds for different reasons. In the retail sector, clearly, rent is a very significant portion of their cost of doing business and we can expect that this will be supportive of that challenge. Whereas… in the airline or hospitality sector, it might be for different costs that they need to support to get through this crisis,” said Finance Minister Bill Morneau in unveiling the new program.
Morneau described it as an effort to protect millions of middle-class jobs by providing the bridge financing firms need to stay afloat through the pandemic and the economic storm it’s caused.
“The COVID-19 crisis has impacted workers in every sector and businesses of every size,” Morneau said, referencing the latest national jobs numbers that showed three million Canadians have lost their jobs since large swaths of society shut down in an effort to slow the spread of the deadly respiratory disease.
For the companies that receive this access to funding, the federal government says it intends to implement strict limits on dividends, executive pay and share buybacks, and will expect these firms to respect all collective bargaining agreements and pensions.
The support will not be accessible to companies that don’t need the funding, nor can it be used to resolve insolvency or to restructure a firm.
As part of this the government is expanding the Business Credit Availability Program, put in place to keep small businesses solvent, to mid-sized companies, and Export Development Canada and the Business Development Bank of Canada will work with private-sector lenders to free up access to tens of millions of dollars in capital, Trudeau said.
CONCERNS ABOUT DELIVERING
Industry Minister Navdeep Bains joined Morneau in making the new aid announcement in advance of Trudeau's address. Bains said, that in addition to helping these companies access financing, the government is studying the various pressures and impacts specific sectors are facing, to inform further policy and aid measures.
In an interview on CTV’s Power Play, Bains said it is “difficult to say” how many firms will seek this financing option, or how much the government is expecting this to cost, but the government anticipates loans to be ready to be doled out in “a matter of weeks.”
Stakeholders and business groups have expressed optimism about the offer of these loans, saying there has been a need for something like this as bigger companies face different economic pressures than smaller shops.
“Like other businesses, larger companies, having invested significantly in worker safety while maintaining staff, cannot continue to do so for the near-term without financial help. Millions of Canadian workers depend upon those companies for their incomes,” said Canadian Chamber of Commerce President Perrin Beatty in a statement.
Though, former Conservative industry minister James Moore flagged a series of concerns with delivering the massive program.
Moore said it is a reasonable goal to place a climate change lens on granting these sums of money but he questioned how smoothly that’ll go, trying to overlap government policy objectives during the application scrutiny process, especially for the oil-and-gas and airline sectors, which are large emitters of greenhouse gases.
“I worry about the government’s capacity to deliver this kind of a program with this kind of complication across a county as complicated as ours, with industries as delicate as they are, that the government has the capacity internally to assess all this. I doubt that that’s the case,” he said, suggesting the government employ some external help in executing these loans.
Further, in a statement reacting to the program, Conservative industry critic Michelle Rempel Garner said the announcement lacks any of the clarity that businesses have been seeking.
“There are no clear timelines, no clear eligibility criteria, no job guarantees, no budget, no transparency and no safeguards to protect taxpayers,” she said. Further, the Conservatives expressed concern with the way the approval process is structured, questioning whether it could lead to the government picking winners and losers.
This new access to funding comes on top of the 75 per cent wage subsidy program, which Trudeau announced on Friday would be extended past June with the promise of more details this week.
The wage subsidy extension came amid questions about whether Canadians and companies would be on their own as provinces and territories begin gradually reopening ways that mean many Canadians won’t be back to work for some time.
REOPENING ECONOMY NEEDS CAUTION
Trudeau said on Monday that, while the economic measures are being taken to ensure there is an economy to rebuild when the public health crisis passes, the country is still very much in the “emergency phase.”
Speaking to the slow revival of aspects of the economy, Trudeau continued to encourage Canadians to “let caution and medical advice be your guides.”
“We are all anxious to see life go back to something that looks more like normal, but we are not out of the woods, yet. And we cannot squander the sacrifices we have made over the past two months,” he said.
Trudeau said that all political leaders are feeling the pressure to find the right balance in reopening while ensuring COVID-19’s spread is under control, but the success in flattening the curve “could all go up in smoke,” if moving too quickly.
As of when the prime minister began his address there were 69,157 confirmed cases of COVID-19 in Canada, and 4,907 people had died.