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Free AccessMNI POLICY: Canada Can Take 15% Stake in Large Borrowers
By Greg Quinn
OTTAWA (MNI) - Canada's finance minister said Wednesday that large public
companies seeking emergency government loans to cope with Covid-19 may have to
give the government a 15% equity stake and an observer's seat on the board of
directors.
The money also can't be used for big dividends, share buybacks or executive
compensation, or to restructure firms, Bill Morneau told reporters in Toronto.
There is no cap on the cost of the program for firms with revenues of CAD300
million seeking at least CAD60 million in financing.
The loans will be at a 5% rate for the first year, 8% in the second, and
rise further after that. Some 20% of the money is lent on a secured basis and
the government has the option for the equity stake and a board seat.
"This will ensure that existing lenders share in the risk," Morneau said at
a press conference in Toronto.
Morneau is aiming to strengthen bailout terms following loans a decade ago
to GM and Chrysler that weren't fully repaid and still led to worker layoffs,
and its more recent purchase of the struggling TransMountain oil pipeline. The
timing is also far different, with aid for big firms coming well after the
creation of programs for laid-off workers and small business.
Companies must also "commit to minimizing the loss of employment and
sustaining their domestic business activities" according to a government
statement, and provide information on how they are fighting climate change.
Morneau reiterated his focus is ensuring a resilient economy, when asked
about the potential for a big deficit this year to trigger a cut to Canada's
triple-A bond rating.
"The way to think about our credit standing is our starting point, which
was strong," Morneau said. Today's deficit spending "will leave us with a
stronger economy, and that strong economy is essentially what those rating
agencies look at to determine our ongoing health."
--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com
[TOPICS: M$C$$$,MC$$$$,M$$CR$]
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.