Feds to seek equity or cash from companies applying for new COVID-19 loan program – CityNews

Large companies that receive bridge financing through a new federal loan program will have to give the government the option to take an ownership stake, or provide a cash equivalent.

Finance Minister Bill Morneau says the terms will be the same for any company asking for help through the Large Employer Emergency Financing Facility (LEEFF) program that opens for applications today.

He says the terms are designed to make sure companies using the program receive bridge loans, not bailouts, to get through COVID-19’s economic disruptions.

The Liberals have said the loans would be on commercial terms, and require companies to have already gone to banks or the market and been unable to meet their financial needs.

Recipients would also have to agree to limits on executive compensation, dividend payments and share buy-backs, as well as show they are contributing to the Liberals’ goal of reducing greenhouse-gas emissions.

Morneau says the loan program for Canada’s largest corporations is so they can stay open and keep employees on their payrolls and to avoid bankruptcies of otherwise viable firms, wherever possible.

The federal government is also expected to announce later in the day rent relief for small- and mid-sized businesses.

Today’s focus follows last week’s extension of the 75 per cent wage subsidy for three months, to the end of August, and Tuesday’s announcement that the government is expanding the eligibility criteria for its small business loan program.

The latter program provides interest-free loans of $40,000 for eligible small businesses to cover costs like rent and utilities, with the possibility of forgiving one-quarter of the amount if it is paid off by the end of 2022.

Tuesday’s fix extended the program to companies that don’t have traditional payrolls, such as family-run businesses that pay themselves in dividends and companies that employ only contractors.

“This is about getting people back to work and giving businesses the confidence to reopen, rehire and even grow because the way our economy will recover and the way our country will remain resilient and successful is by getting Canadians back to work,” Prime Minister Justin Trudeau said Tuesday.

Today’s focus on rent relief and the large corporation loans program is aimed at conveying the same message.

The LEEFF program was announced last week, aimed at providing short-term bridge financing to companies with $300-million or more in annual revenues looking for loans worth at least $60 million but unable to secure them from banks or other private lenders.

Trudeau has also said applicants whose financial records show signs of “aggressive tax avoidance” will be prohibited, as will companies convicted of tax evasion in the past.

While the LEEFF program was generally well received last week, many companies said they had to wait for the details before knowing whether it would be of use to them.

The government had hoped it would be used by airlines to stay afloat during the pandemic, which has brought air travel to a virtual standstill. But late last week Air Canada announced plans to lay off about 20,000 employees.

Under the commercial rent relief program, landlords are to apply for a 50 per cent subsidy paid for by federal and provincial governments, with tenants paying another 25 per cent. But critics have said many landlords, who would have to accept a 25 per cent reduction in the rent they receive, have refused to participate.

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