Financial Assistance for Large Canadian Companies Now Open
Applications are now open for large companies seeking financial assistance from the federal government.
Finance Minister Bill Morneau spoke Wednesday morning and said large companies that receive the bridge financing through the new federal loan program will have to give the government the option to take an ownership stake, or provide a cash equivalent.
According to Morneau, the terms are designed to make sure companies using the program receive bridge loans, not bailouts, to get through COVID-19's economic disruptions.
Publicly traded companies or any of their private subsidiaries will have to issue warrants giving the government the option of purchasing shares worth 15 per cent of the loan, or receiving the equivalent in cash. Privately held companies will pay the same in fees, Morneau says.
“The idea behind the warrant is to make sure that if the firm does well that Canadians, and Canadian taxpayers, share in that upside.”
The Liberal Government has 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.
Loans would start at $60-million with no upper limit, Morneau says, and be targeted at firms with earnings of at least $300-million.
Interest will be set at five per cent in the first year, rising to eight per cent in the second year, and two per cent annually thereafter.
The terms of the program posted online say companies can pay off the interest on the loan through in-kind contributions, usually goods or services, for the first two years of the loan.
— With files from The Canadian Press