Continuing the approach of broad economic measures in response to COVID-19, the federal government has announced new liquidity measures to support large businesses. The measures are meant to provide bridge financing through the crisis, and complement existing support programs for businesses, including wage subsidies. The program is intended to support sectors across the Canadian economy, including those hit hardest by the COVID-19 pandemic, such as airlines and tourism.
The new Large Employer Emergency Finance Facility (LEEFF) will provide bridge financing to large Canadian companies and to try and avoid bankruptcies of otherwise viable firms. The program is available to for-profit businesses (with the exception of those in the financial sector) and certain not-for-profit businesses, such as airports, with annual revenues of $300 million or higher and seeking financing of $60 million or more.
Intended to be credit of last resort when conventional financing is not available, the program comes with guardrails to ensure that it is used to meet the government’s intentions, both with respect to supporting workers in COVID-19, but also the Liberal government’s agenda with respect to the economy and the environment:
- Companies will have to demonstrate how they intend to preserve employment, maintain investment, respect collective bargaining agreements and protect workers’ pensions
- Strict limits to dividends, share buy-backs, and executive pay
- Assessments will be made of a company’s employment, tax and economic activity in Canada, as well as its international organizational structure and financing arrangements.
- Not available to companies that have been convicted of tax evasion
- Companies will have to publish annual climate-related disclosure reports, including how their future operations will support environmental sustainability and national climate goals
The program will be delivered by the Canadian Development Investment Corporation, in cooperation with Innovation, Science and Economic Development Canada and Finance Canada. The program details and application process will be confirmed shortly and a costing for the program was not announced.
A Broad Approach
A question that is top-of-mind is whether the broad approach captures the unique multitude of challenges facing the oil and gas sector. When pressed, Finance Minister Bill Morneau emphasized the program’s conditions on share buy backs and alignment with the climate-disclosure reporting, noting that Suncor had already moved forward with measures that would respect these conditions.
Conservative Leader Andrew Scheer expressed disappointment that the program was not industry-specific and didn’t address the unique circumstances and challenges faced by various sectors. Alberta’s Finance Minister Travis Toews said he was pleased with the program, noting that Alberta companies were not looking for bailouts.
The federal move comes as some provinces begin to leverage capital investment in order to stimulate provincial economies as part of the COVID-19 recovery.
- The federal government has expanded the Business Credit Availability Program for the mid-market segment, to provide loans of up to $60 million per company and guarantees of up to $80 million.
- Ontario’s legislature will meet on May 12 for a fourth special sitting, where it will consider extending the provincial state of emergency until June 2, which will allow the province to continue to enforce emergency orders as it begins to reopen.
- Manitoba is increasing its infrastructure investments by an additional $500 million through the Manitoba Restart Program. The investment is in addition to $3 billion of already-planned infrastructure investments over the next two years.
- The program includes new water and sewage projects, road and highway resurfacing and repairs, bridge repairs, municipal infrastructure priorities and potential new cost-sharing projects with other levels of government. Specific projects would start to be determined in the coming weeks.
- Alberta is moving ahead with $426 million in capital maintenance and renewal funding to support over 3,200 jobs. The shovel-ready projects include school renovations, highway repaving and upgrading bridges and culverts. Alberta has also provided a $147 million Disaster Recovery Program to recover and rebuild after spring flooding in Fort McMurray.
- Saskatchewan announced a $7.5 billion, two-year capital plan to stimulate economic recovery. The investment includes a $2 billion stimulus injection over the province’s existing capital plan, and will focus on smaller, short-term projects, including more than $300 million for highways projects, $200 million for health infrastructure and $135 million for education infrastructure.