Federal government to seek equity or liquidity from companies applying for new Covid-19 loan program
He says the conditions are designed to ensure companies using the program receive bridging loans, not bailouts, to overcome economic disruption from Covid-19.
Listed companies, or their private subsidiaries, will be required to issue warrants giving the government the ability to buy shares worth 15% of the loan, or receive the equivalent in cash. Private companies will pay the same fees, Morneau says.
“The idea behind the mandate is to make sure that if the business is successful, Canadians and Canadian taxpayers share that benefit,” he says.
“The Canadian government won’t have to take that value in stocks, it can take it in cash. “
The Liberals said the loans would be on commercial terms and would require companies to have already gone to banks or the market and not been able to meet their financial needs.
Recipients should also agree to limits on executive compensation, dividend payments and share buybacks, as well as show they are contributing to the Liberals’ goal of reducing greenhouse gas emissions.
The loans would start at $ 60 million with no upper limit, Morneau says, and would be targeted at companies with revenues of at least $ 300 million.
Morneau says the loan program for Canada’s Largest Businesses is so they can stay open and keep their employees on their payrolls and avoid bankruptcies of otherwise viable businesses, where possible.
The interest will be set at 5% the first year, will rise to 8% the second year and 2% annually thereafter. Program terms posted online state that businesses can repay loan interest through in-kind contributions, usually goods or services, during the first two years of the loan.
“What we’ve done here is make sure we’re offering a low level of interest in the first year, but an appropriate level for employers looking for it to go to their own funding sources first,” Morneau said one morning. press conference in Toronto.