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COVID-19: Canadian Federal Government Financial Support for Large Businesses (LEEFF)
Practical Law Canada Legal Update w-025-5085 (Approx. 3 pages)
COVID-19: Canadian Federal Government Financial Support for Large Businesses (LEEFF)
by Practical Law Canada Finance
| Published on 14 May 2020 • Canada (Common Law), Quebec |
This Legal Update provides an overview of the Large Employer Emergency Financing Facility program being created by the Government of Canada that will be available to eligible Canadian for-profit companies and certain not-for-profit companies with annual revenues of $300 million or more.
This Legal Update provides a summary of the recent May 11, 2020, announcement of the Canadian federal government. The federal government announced that it will be creating a Large Employer Emergency Financing Facility (LEEFF) to provide bridge financing to eligible large Canadian businesses with the goal of preventing otherwise viable businesses from becoming insolvent as a result of the 2019 novel coronavirus disease (COVID-19) and sustaining jobs.
For information on Canadian Federal Government financial support for small and medium-sized businesses, see COVID-19: Canadian Federal Government Financial Support for Small and Medium-Sized Businesses.
This is what we know so far:
The Program
The Government of Canada has announced that it is providing a new LEEFF program that will enable eligible large Canadian corporations, who are otherwise viable but for the current uncertainties resulting from COVID-19, to have access to a bridge loan to avoid bankruptcy or insolvency. The program will be available to eligible companies in all industries except for the finance industry and is designed to provide relief where needs are not being met through conventional financing. The program will be delivered by the Canada Development Investment Corporation in cooperation with Innovation, Science and Economic Development Canada and the Department of Finance.
Eligibility
To be eligible for a bridge loan under the LEEFF program, a company will have to:
- Be a for-profit business, or certain not-for-profit businesses (for example, airports), operating in any industry except for the finance industry.
- Have annual revenue of approximately $300 million or more.
- Require bridge financing of approximately $60 million or more.
- Have significant operations or workforce in Canada.
- Not be involved in active insolvency proceedings.
- Demonstrate that the funds will allow it to preserve jobs and maintain investment activities.
- Protect collective bargaining agreements and employee pension plans.
- Adhere to strict dividends, share buy-backs and executive pay restrictions.
- Pass an assessment, if required by the government, on the company's employment, tax, economic activity in Canada, international organizational structure and existing financing arrangements.
- Show that operations support environmental sustainability and national climate goals and publish annual climate-related disclosure reports.
- Show that its private sector lender is in support of the company and this program.
Ineligibility
The following companies will be ineligible for the bridge financing:
- Businesses in the financial sector and all businesses below the $300 million annual revenue threshold.
- Companies that otherwise have the capacity to manage through COVID-19 without LEEFF relief.
- Companies looking for, in essence, debtor-in-possession financing to restructure their affairs.
- Companies that have been convicted of tax evasion.
Practical Law Canada will continue to monitor the program and provide a further legal update as more information becomes available.