How taxpayers stand to benefit from federal support for big business amid COVID-19

Finance Minister Bill Morneau provided details about the federal government’s Large Employer Emergency Financing Facility (LEEFF) on Wednesday. The program, announced last week, gives financial support to big businesses that need help get them through the COVID-19 pandemic.

Companies with annual sales of at least $300 million can apply for the program designed to protect businesses and jobs.

“These terms ensure that this financing facility provides financing to bridge through this difficult time, but not bailouts,” Morneau said during a news conference.

Public companies must issue warrants with the option to purchase the borrower’s common shares totalling 15 per cent of the principal amount, or receive cash consideration equivalent to the value of the warrants.

“The idea behind the warrant is to make sure that if a firm does well, that Canadians and Canadian tax payers share in that upside,” Morneau said.

Morneau also said Ottawa won’t sit on company boards, but will have “observers.” Private companies will pay a fee in lieu of the warrants.

Businesses can qualify for loans of $60 million or more, of which 80 per cent is secured and 20 per cent is unsecured. There is no upper limit and businesses can apply for the next 12 months through CDEV. Approval will be on a case-by-case basis. 

The interest rate will be cumulative at 5 per cent per annum, payable quarterly in arrears. It increases to 8 per cent on after a year, and by a further 2 per cent per annum each year thereafter.

As previously announced, the loan comes with strict conditions. Companies will be required to have a large footprint in Canada and show how a plan to maintain employment. They will also be subject to environmental assessments and conditions.

There will be strict limits on dividends, share buy-backs, and executive pay. Companies convicted of tax evasion will be disqualified. Collective bargaining agreements, including pensions, will have to be respected.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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