The federal government announced Monday it will provide new emergency financing to large and medium-sized businesses during the COVID-19 pandemic, and is expanding the Business Credit Availability Program (BCAP) to support these firms.
Under the expanded BCAP, eligible businesses can receive loans of up to $60 million per company, and guarantees of up to $80 million.
Finance Minister Bill Morneau announced the government will establish the Large Employer Emergency Financing Facility (LEEFF), a program to provide bridge financing to Canada’s largest employers affected by COVID-19.
The LEEFF is aimed to help large firms protect Canadian employees and avoid bankruptcies of “otherwise viable firms” during the economic downturn. The program is specifically targeted to firms whose needs are not being met through conventional financing.
The LEEFF program will be open to large for-profit businesses, but will not be available for those in the financial sector or not-for-profit businesses like airports, with annual revenues of $300 million or higher. Morneau noted that the program is open to all sectors, pointing to companies such as airlines and those in the oil and gas sector.
To qualify for LEEFF support, eligible businesses must be seeking financing of about $60 million or more, have “significant operations or workforce” inside Canada, and cannot be involved in active insolvency proceedings.
Prime Minister Justin Trudeau said during his daily briefing that this program is “not a gift” to large corporations. He stated that the LEEFF is about protecting jobs for individuals and making sure that businesses don’t go bankrupt because of COVID-19.
The government said the LEEFF will require “strict limits” to dividends, share buy-backs, and executive pay. Businesses must demonstrate how they intend to preserve employment and maintain investment activities in order to receive support. Recipients will need to commit to collective bargaining agreements and protect workers’ pensions.
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To access the funding, companies are also required to commit to publish annual climate-related disclosure reports consistent with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. The climate-related disclosure should include how future operations will support environmental sustainability and national climate goals.
Support through LEEFF will be deployed by the Canada Development Investment Corporation, in cooperation with Innovation, Science and Economic Development Canada, and the Department of Finance. The government said it is in the “final stages of establishing the program,” and that further information about the application process will be provided soon.
BCAP expanded to help mid-sized firms
As part of its support, the government is also expanding BCAP to help mid-sized companies with larger financing needs. Eligible businesses will be able to receive loans of up to $60 million per company, and guarantees of up to $80 million.
Until now, BCAP was targeted toward small and medium-sized businesses. It consisted of a co-lending program through the Business Development Bank of Canada (BDC) and a loan guarantee through Export Development Canada (EDC). Both BDC and EDC are deploying these programs through financial institutions like banks and credit unions.
“We know that Canadian workers and companies of all sizes are facing economic hardship and uncertainty during the COVID-19 pandemic,” said Minister of Innovation, Science, and Industry Navdeep Bains.
“We continue to analyze the specific pain points that COVID-19 is putting on all our industrial sectors as they grapple with unprecedented financial difficulties during this crisis,” he added. “The measures we are announcing today will add to the supports currently available to large employers in Canada to help them weather the storm during this difficult time.”
The government said it will also continue to provide funding to businesses through Farm Credit Canada, BDC, and EDC. No further details were provided.
With files from Meagan Simpson
Image source Justin Trudeau via Flickr.