Scheer says loan program falls short of what Canada’s oil and gas sector needs
The federal government is offering bridge financing for big Canadian businesses across all sectors to help them keep employees on the payroll through the pandemic, but there are conditions attached — including a requirement that companies receiving the loans disclose their environmental plans.
The large employer emergency financing facility (LEEFF) will provide support to employers with annual revenues of more than $300 million whose credit needs aren’t being met through conventional financing.
While he said today the details are still being worked out, Prime Minister Justin Trudeau stressed that the program is a bridge loan program, not a “bailout,” and that the government is “a lender of last resort.”
“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,” he said.
“We will not allow millions of people to lose their livelihoods because of unprecedented events that were beyond their control.”
The program’s goal is to protect jobs while helping businesses avoid bankruptcy and weather the pandemic’s economic effects, Finance Minister Bill Morneau said today.
The program is open to large commercial businesses in all sectors (except those in the financial sector) and certain not-for-profit businesses, like airports.
“Canada needs them to stay strong through this crisis,” Morneau said during a news conference in Toronto.
To qualify, businesses must be looking for financing of $60 million or more and have significant operations or large numbers of employees in Canada, and must not be involved in any ongoing insolvency proceedings.
Morneau said the program is meant to help companies that have a “significant footprint” in Canada bridge to better days. It is not intended to be a low-cost loan program for companies that don’t need it, or to bail out companies that were already in financial trouble before the pandemic.
Environmental plans required
Morneau said applicant companies must disclose their climate action plans and sustainability goals in order to qualify. They must meet other conditions as well — including not paying their executives “excessive” salaries.
Companies that have been found guilty of tax evasion are disqualified from the program.
“Among the conditions are making sure that there [are] no share buybacks or dividends or excessive executive pay, but also that companies have financial disclosures on their climate situation and that they’re part of our long-term sustainability goals,” Morneau said.
“That’s something we see across sectors. Certainly we see companies in the energy sector, companies like Suncor, that have moved forward with these approaches, that respect these engagements, and there [are] many other companies as well that are looking towards that.”
Innovation Minister Navdeep Bains said the government has been considering the plight of the energy sector, as well as others such as manufacturing and tourism, food and hospitality, as it develops pandemic emergency aid programs.
“There’s been no part of the economy that hasn’t been impacted negatively by COVID-19. So the way this program is designed is open to all sectors and we’re doing the analysis. We are looking at the pain points and pressures that different sectors are going through,” he said.
Details still to come
Program details are still being worked out and information on the application process is expected shortly.
Conservative Leader Andrew Scheer said the announcement was short of details about the terms of the loans, who the lender is and whether a company needs to demonstrate certain levels of revenue loss.
He also said it falls short of what’s needed to help the struggling energy sector.
“If this is it, this is not what was promised or what was expected,” he said. “Minister Morneau promised an industry-specific package to the oil and gas sector that would address the very, very unique set of circumstances and very specific challenges that the sector is facing.”
Alex Pourbaix, president and CEO of Cenovus Energy, said it’s too early to say whether his company might access the program. In an interview with the CBC’s Rosemary Barton, he said oilpatch companies will continue to rack up debt until oil prices increase but he’s hopeful about the sector’s longer-term prospects.
“I think the combination of the banks and … this government support, hopefully, will be very helpful to see this industry through to the other side, where it can help lead the recovery,” he said.
Today’s announcement comes just days after Statistics Canada’s monthly labour force survey data showed almost two million jobs lost during the month of April — a record high. That brings the total number of jobs lost during the crisis to more than three million — the result of non-essential businesses and services being forced to close to slow the spread of the novel coronavirus.
The unemployment rate soared to 13 per cent last month, up from 7.8 per cent in March.
Singh says aid must help workers, not CEOs
NDP Leader Jagmeet Singh said there must be strings attached to ensure financial supports help workers, not executives.
“Any government help that goes to large companies must be tied to creating or maintaining Canadian jobs. Help must go to workers, not to CEOs. And any company cheating the public by not paying their fair share of taxes must not get any help from the public,” he said in a statement.
Goldy Hyder, president and CEO of the Business Council of Canada, said the program is badly needed and he looks forward to seeing more details.
“The priority of our members throughout the health emergency has been to preserve as many jobs as possible. Canada’s leading companies have always demonstrated a high level of commitment to their employees and the communities in which they operate,” he said in a statement.
“They are world leaders when it comes to sustainable environmental practices, corporate governance and corporate social responsibility.”
Program conditions need ‘real teeth’
Greenpeace welcomed the various conditions the government is imposing on companies applying for the loans.
“There have to be some real teeth in how this is implemented, but it makes sense that companies seeking public support agree to limit dividends and executive pay, forgo tax havens and start aligning their business model with Canada’s climate change targets,” said Keith Stewart, the group’s senior energy strategist, in a media release.
“Companies funding campaigns to oppose action on climate change should be excluded from the program.”
Trudeau said the government is taking steps to ensure the economy can come back strong after the pandemic subsides, and said there may be more emergency aid if it’s needed.
“There may be more steps we have to take. We don’t know what the next possible steps are that we’re going to need. We’re going to stay open and flexible to adjusting the programs we’ve put forward, to stretching them out, to condensing them, to combining them,” he said.
“We’ve demonstrated every step of the way that we’re figuring out what works best and if something doesn’t work great, we’ll pull it back and tweak it and try to put it out in a different way.”