Beyond COVID-19: Crisis response or road to recovery?
Crisis response or road to recovery?
In addition to the Business Credit Availability Program, which provides financing support for small- and medium-sized Canadian businesses, the government of Canada has opened the application portal to the Large Employer Emergency Financing Facility. This new program is designed to provide bridge financing to large employers whose needs are not being met through conventional financing during the COVID-19 pandemic so that they can preserve their employment, operations and investment activities until they can access more traditional market financing.
The following provides a short summary of the details of the program announced on May 20. Note that many of the key issues will be addressed on a case-by-case basis with borrowers.
The LEEFF program is designed to provide short-term liquidity support through bridge financing for large for-profit businesses and certain not-for-profit businesses that have been affected by the COVID-19 pandemic. The intent of LEEFF is to help large Canadian businesses preserve their employment, operations and investment activities until they can access more traditional market financing.
LEEFF provides short-term liquidity assistance in the form of interest-bearing term loans delivered by the Canada Enterprise Emergency Funding Corporation (CEEFC). The program will employ a standard set of economic terms and conditions to ensure timely support.
No deadline for applications has been announced and the LEEFF program plans to remain open while the current economic situation persists.
Large for-profit enterprises in all sectors, except for those in the financial sector, can apply for funding under LEEFF. Certain not-for-profit enterprises, such as airports, could also be eligible.
In determining eligibility, an assessment will be made of the applicant business’s employment, tax and economic activities in Canada, as well as its international organizational structure and financing arrangements.
The terms and conditions will be commercial in nature. The key terms that have been announced are as follows:
The borrower may prepay the loan at any time without penalty.
Any business accessing the LEEFF program will be subject to a number of additional requirements while the loan is outstanding under the program.
Broader sectoral dynamics for LEEFF applicants will be considered through processes led by Innovation, Science and Economic Development Canada.
The LEEFF Factsheet states that it is designed to help Canadian companies but also protect the interests of Canadian taxpayers. Therefore, in addition to the security interest on the secured loan facility and interest rate charged for the loans, the following will be required from the applicant business:
The LEEFF program will be delivered by the Canada Enterprise Emergency Funding Corporation (CEEFC), a subsidiary of Canada Development Investment Corporation, in cooperation with Innovation, Science and Economic Development Canada (IESD) and the Department of Finance.
Any businesses interested in accessing the LEEFF program should register their interest at LEEFF-CUGE@cdev.gc.ca. The applicant business will be contacted by representatives of CEEFC and IESD to begin the process, and will in this first step be provided a non-disclosure agreement, application form and instructions from the CEEFC representative.
The authors would like to thank Hansik Ha, articling student, for his assistance in preparing this legal update.
COVID-19 has made it difficult for many companies to perform some of their contractual obligations, giving rise to a high number of corporate disputes, particularly relating to the application of force majeure and change in law provisions.
© Norton Rose Fulbright LLP 2020