OTTAWA (Reuters) - Ottawa on Monday said it would be the lender of last resort for large Canadian employers that need help getting through the economic downturn caused by the novel coronavirus, including those in the hard-hit airline and energy sectors.
The Large Employer Emergency Financing Facility (LEEFF) is for all companies, except those in finance, with an annual revenue of C$300 million ($215 million) or more that are seeking financing of at least C$60 million and have “significant operations or workforce in Canada,” a government statement said.
Finance Minister Bill Morneau said airlines, energy companies and non-essential retailers were the types of businesses that might access the program. It is unclear whether Ottawa is still planning more sector-specific aid.
“Clearly the airline sector would be a good example of a sector that we’re quite concerned about,” Morneau told reporters, adding that many non-essential retailers “are facing extreme challenge because they’re literally closed down”.
The Canadian Chamber of Commerce and other major business groups welcomed the move, as did Tim McMillan, head of the Canadian Association of Petroleum Producers.
The finance minister in Alberta, the heart of the country’s oil patch, told reporters on Monday the support will help the energy industry meet liquidity needs that the province has pegged as high as C$30 billion.
“We’re hopeful that this program may go some distance, hopefully all the way, in meeting that need,” Travis Toews told reporters, adding that it was his understanding that there was no cap on the loan amounts.
Canada shut down non-essential business starting in mid-March because of the coronavirus, throwing millions out of work. More than 7.8 million Canadians are receiving some form of federal unemployment assistance.
On Monday, Canada’s coronavirus deaths rose less than 4% from a day earlier to 4,906. The spread has slowed in Canada in recent weeks.
So several provinces are moving to gradually reopen businesses that had been shut down, with Quebec, which has seen the largest number of COVID-19 cases in Canada, re-opening some of its schools on Monday.
“We’re not out of the woods yet and we cannot squander the sacrifices we’ve made over the past two months,” Liberal Prime Minister Justin Trudeau cautioned during his daily press conference, where he also outlined restrictions tied to the loan program.
Companies must respect collective bargaining agreements, protect workers’ pensions and back the country’s carbon emissions plan, and there are “strict limits” on share buybacks, dividends and executive compensation, he said.
In normal times, these loans would come from the private sector, but this is “an extraordinary situation” that requires the government to step up as the “lender of last resort,” Trudeau said.
“These are bridge loans, not bailouts,” he said.
Air Canada last week warned that third-quarter capacity would slump about 75%, and Canada’s oil patch is facing its worst crisis in 40 years.
The government is also expanding its credit program for mid-sized companies, which will include loans of up to $60 million and guarantees of up to $80 million. Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) will work with private sector lenders to provide these loans.
Reporting by Steve Scherer and Kelsey Johnson, additional reporting by Jeff Lewis in Toronto; Editing by Andrea Ricci, Steve Orlofsky and Marguerita Choy