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Due to the COVID-19 pandemic, the Canadian Government has announced several aid programs intended to help small business, such as the wage subsidy program and the Canada Emergency Commercial Rent Assistance.

This week, the Federal Government announced a new aid program aimed at larger businesses, called the Large Employer Emergency Financing Facility (“LEEFF”).

What is LEEFF?

LEEFF is a program which provides short-term liquidity assistance for large Canadian employers who have been affected by the COVID-19 pandemic in the form of interest-bearing term loans.

These loans are intended to help large Canadian employers preserve their employment, operations and investment activities until they can access more traditional market financing.

As part of the announcement, Canadian Minister of Finance Bill Morneau, stated:

“We know that times have been tough, and Canadians are concerned about their jobs. We continue to make sure government action responds to the significant needs of Canadians and businesses during the COVID-19 pandemic. LEEFF will help protect jobs, safeguard workers’ benefits, and protect our economy. It will help businesses keep workers on the payroll, and put more Canadians in a position to recover quickly once we make it through these uncertain times.”

Loans of $60 million and above will be awarded based on the applicant’s cash flow needs for the next 12 months. The loan size for each applicant will be assessed on a case-by-case basis.

No deadline has been announced. Rather, the Government has stated that the application process will remain open while the current economic situation persists.

Who is Eligible?

LEEFF will be open to large Canadian employers who: 

(1) Have a significant impact on Canada’s economy, as demonstrated by having significant operations in Canada or supporting a significant workforce in Canada; 

(2) Can generally demonstrate approximately $300 million or more in annual revenues; and 

(3) Require a minimum loan size of $60 million. 

Large for-profit enterprises in all sectors, except for those in the financial sector, can apply for funding under LEEFF. Additionally, certain not-for-profit enterprises, such as airports, could also be eligible. 

Companies seeking support must commit to minimizing the loss of employment and sustaining their domestic business activities, and must demonstrate that funding under LEEFF forms part of their overall plan to return to financial stability. 

The Government has stated that companies that have been found guilty of tax evasion will not be eligible under the program.

Application Process

Applicants must submit their request to LEEFF-CUGE@cdev.gc.ca. 

The applicant will then receive a non-disclosure agreement, application form and instructions. The application form will request important information relating to the applicant and its financial condition.

Applicants will be then be contacted to begin the process.

Terms and Conditions of the Loan

The terms and conditions of the loans have been set out as follows:

  • Size/Principal Amount – The loan will be provided by way of two loan facilities: an unsecured facility equal to 80% of the aggregate loan and a secured facility equal to 20% of the aggregate loan amount. The minimum aggregate loan will be $60 million. The loan will be advanced in tranches over 12 months.
  • Interest Rate – With respect to the unsecured facility, cumulative at 5% per annum payable quarterly in arrears. The interest rate will increase to 8% per annum on the one-year anniversary and will increase by a further 2% per annum each year thereafter. To reduce cash pressures, interest may be paid in-kind for the first two years of the loan. For the secured facility, the interest rate will be based on the interest rate of the borrower’s existing secured debt.
  • Term – The duration of the unsecured facility will be five years. The duration of the secured loan facility will match that of the borrower’s existing secured debt. The borrower may prepay the loan at any time without penalty.
  • Restrictions – The borrower will be subject to certain operating requirements while the loan is outstanding including (i) prohibitions on dividends, capital distributions and share repurchases, and (ii) certain executive compensation restrictions.
  • Covenants – The borrower will be subject to certain affirmative covenants while the loan is outstanding including (i) performance of obligations under existing pension plans; (ii) performance of material obligations under applicable collective bargaining agreements; and (iii) publishing an annual climate‑related financial disclosure report, highlighting how corporate governance, strategies, policies and practices will help manage climate-related risks and opportunities; and contribute to achieving Canada’s commitments under the Paris Agreement and goal of net zero by 2050.
  • Governance – The Government will reserve the right to appoint an observer to the board of the borrower.
  • Conditions – Certain conditions will need to be satisfied before the initial advance of funds, which will include certain waivers from existing lenders or bondholders of the borrower.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company, we provide responsive, strategic, and pragmatic business and legal solutions to our clients. Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. To hear more about how we can help, call us at 416-777-0100 or contact us online.

Have Questions? Contact Us

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Toronto, Ontario, Canada
M5H 3P5

Phone: 416-777-0100
Fax: 416-366-3992
info@bakerlawyers.com