Canada to be lender of last resort for big companies like airlines and oil producers

Canada on Monday said it would be the lender of last resort for large 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.

The government had previously said it was working on support for the airline industry and perhaps more help for the oil industry. It is unclear whether further aid for those sectors was still being considered. Finance Minister Bill Morneau said airlines, energy companies and non-essential retailers were the types of businesses that might access the program. It was not clear whether there was a maximum loan amount.

"Clearly the airline sector would be a good example of a sector that we're quite concerned about," Morneau told reporters. "We also see that there's many non-essential retailers that are facing extreme challenge because they're literally closed down." The Canadian Chamber of Commerce and other major business groups welcomed the move.

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 almost 4% to 4,906 from 4,728 the previous day. The spread of the coronavirus in Canada has slowed in recent weeks.

Several provinces now are moving to gradually reopen businesses that had been shut down to fight the outbreak, 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," Prime Minister Justin Trudeau cautioned during his daily press conference.

Trudeau also outlined the restrictions tied to the loan program. "Any company that receives this support is expected to make and keep certain commitments," Trudeau said, adding that there were "strict limits" on share buybacks, dividends and executive compensation. "These are bridge loans, not bailouts."

Companies also must respect collective bargaining agreements, protect workers' pensions and back the country's carbon emissions plan. 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.

"We will not allow millions of people to lose their livelihoods because of unprecedented events beyond their control," 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. ($1 = 1.3983 Canadian dollars)

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