Ottawa pledges financial support to Canada’s biggest companies
May 12, 2020
Bruce Campion-Smith, Tonda MacCharles and Alex Ballingall
In a sobering signal of the severity of the economic crisis, the federal government is promising big loans to the country’s biggest employers that it says are needed to avert devastating bankruptcies.
But the announcement drew immediate criticism from NDP Leader Jagmeet Singh, who said that Ottawa should be demanding equity in return for the financing to help safeguard taxpayer investments and exert control over conditions that must be met to qualify.
“If we made it equity, then we would have some control over what happened and we’d have a guarantee that we’d get that money back, a loan we’re hoping that we’ll get paid back,” Singh said.
Saskatchewan Premier Scott Moe said the package -- rolled out as Ottawa’s long-promised support to hard-hit sectors of the economy -- fell far short of what the energy industry needs to blunt the effects of the virus and a sharp downturn in oil prices.
“This will not go any measurable way to providing support for the energy industry,” Moe said, calling for a package of the “size and scope” that rescued the auto industry during the recession more than a decade ago.
“It’s one of the largest wealth drivers in this nation and for this government to not step up and support the energy industry in the same way a previous government supported the auto industry would be very, very problematic for the Canadian economy,” Moe said.
Moe did not have a full briefing but said for the federal government not to provide billions in aid to the sector “would be a very unfortunate decision for the current minority administration.”
The program -- labelled the “Large Employer Emergency Financing Facility” -- will see the government act as a “lender of last resort” to companies unable to secure funding through conventional means, Prime Minister Justin Trudeau said Monday during his daily pandemic briefing.
“But let me be clear: these are bridge loans, not bailouts,” Trudeau said.
He said the objective is to avert bankruptcies, “keep large Canadian companies on their feet and protect the millions of jobs they provide.”
Doing nothing would risk long-term damage to the Canadian economy, he said, citing the danger “that we see significant large companies that employ millions of Canadians lose their existence, stop functioning because of this pandemic and millions of Canadians lose their jobs.”
Finance Minister Bill Morneau said the aid -- meant for companies with revenues topping $300 million -- was aimed at “all sectors” hit by the fallout of the virus, singling out airlines and non-essential retailers, which he said are facing an “extreme challenge.
“What we’re doing here is providing financing that will be available to any sector that’s finding themselves in a challenge,” he said.
But the financing will come with conditions. Companies will have to keep workers on the payroll and respect union contracts. There will be “strict” limits on dividends, share buybacks and executive pay. Companies will also be required to show how their operations “support environmental sustainability and national climate goals.”
Companies will be evaluated on their “employment, tax, and economic activity in Canada, as well as (their) international organizational structure and financing arrangements.” Those convicted of tax evasion won’t be eligible.
Still, Singh called the announcement “wholly inadequate” and urged tighter conditions on CEO bonuses, share buybacks and the requirement that employees be retained. “There isn’t a real clear sense that the money has to be strings-attached to jobs in Canada,” he said.
Goldy Hyder, president and CEO of the Business Council of Canada, said that the need for such financing is real, especially among businesses in the tourism, retail and energy sectors.
“The longer this goes, the more difficult it becomes for companies even with relatively decent balance sheets to make it to other side,” Hyder said.