On May 11, 2020, Prime Minister Justin Trudeau announced that, as part of its COVID-19 Economic Response Plan, the federal government will establish the Large Employer Emergency Financing Facility (LEEFF) program. LEEFF’s objective is to provide bridge financing to large Canadian employers affected by COVID-19 whose needs are not met through conventional financing, thereby helping them to protect jobs, weather the current economic downturn, remain active, and avoid bankruptcies. The LEEFF program will be delivered by the Canada Development Investment Corporation, in cooperation with Innovation, Science and Economic Development Canada , and the Department of Finance.
LEEFF is not intended to be used to resolve insolvencies or restructure firms, nor will it be provided to companies capable of managing through the crisis. During the May 11, 2020 press conference, the Prime Minster emphasized that the LEEFF program is a bridge loan program and not a "bailout," and noted also that the government is "a lender of last resort."
Which businesses are eligible?
The LEEFF program is available to large for-profit businesses (except for those in the financial sector), and certain not-for-profit businesses (e.g., airports) that:
- Have annual revenues of $300 million or higher;
- Are seeking financing of $60 million or more;
- Have significant operations or workforce in Canada; and
- Are not involved in active insolvency proceedings
What will companies seeking LEEFF support be required to do?
Companies that seek LEEFF support will be required to:
- Demonstrate how they intend to preserve employment and maintain investment activities;
- Commit to respect collective bargaining agreements;
- Protect workers’ pensions;
- Strictly limit dividends, share buy-backs, and executive pay; and
- Commit to publish annual climate-related disclosure reports consistent with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, including how their future operations will support environmental sustainability and national climate goals.
In addition, when a company seeks LEEFF, an assessment will be made of its:
- Employment, tax, and economic activity in Canada; and
- International organizational structure and financing arrangements.
Involvement of applicants’ private-sector lenders
Applicants’ private-sector lenders will be required to cooperate to ensure that the government’s financing is focused on sustaining operations.
The government is in the final stages of establishing the LEEFF program. Further information will soon be released.
Bottom line for employers
The LEEFF program is intended to help significant Canadian companies that are experiencing financial difficulty as a direct result of the COVID-19 pandemic. LEEFF support is not intended for companies that were in a financially fragile state prior to the global crisis caused by the virus.
The LEEFF program must still be passed into law (no timetable has been announced). Like the CEWS wage subsidy program, the LEEFF program may well undergo changes and refinements after stakeholders have weighed in and before a final Bill is passed. We will be following developments as they unfold and will provide updated details as soon as we can.