Large Enterprise Tariff Loan (LETL) Facility Factsheet
What is the Large Enterprise Tariff Loan (LETL) facility?
The LETL facility is a program instituted by the Government of Canada to provide liquidity assistance in the form of interest-bearing term loans to large Canadian enterprises who have been (or expect to be) affected by new tariffs and countermeasures.
The intent of the LETL facility is to provide financing to cover an eligible applicant’s thirty‑six (36)‑month liquidity and operating needs after exhausting all other sources of capital, helping these enterprises preserve employment and operations until they can access more traditional market financing. The LETL facility is delivered through Canada Development Investment Corporation (CDEV) via its subsidiary, Canada Enterprise Emergency Funding Corporation (CEEFC).
Who is eligible?
The LETL facility is open to large Canadian enterprises who
can demonstrate they have been (or expect to be) affected by the new tariffs
and countermeasures and who: a) have an impact on Canada’s economy as a result
of: (i) significant operations in Canada; or (ii) a significant workforce in
Canada; b) have approximately $150 million, or more, in annual Canadian
revenue; and c) require a minimum loan size of $30 million. Large for-profit
enterprises in all sectors can apply for funding under the LETL facility. Companies that have been found guilty of tax
evasion are not eligible. Additional ineligible borrower categories include
certain public institutions, specified entities with direct or indirect
significant ownership by political office holders, and entities that promote
violence, incite hatred or discrimination, among others.
Companies seeking support must make commercially reasonable
efforts to retain domestic employment and sustain their domestic business
activities. They must demonstrate that funding under the LETL facility forms
part of their overall transition plan to return to financial stability. Borrowers
must demonstrate that they have used their efforts to establish a plan to
increase sales to and purchases from Canadian markets to support Canadian
projects, and must have a plan that presents a reasonable likelihood of the
Borrower returning to a position of financial stability and being able to repay
the Loan Facilities at maturity.
In addition, the borrower must meet the following
requirements:
- Other
sources of funds– the borrower must demonstrate that they have sought
to secure funds through traditional sources of market financing.
- Going
concern– the borrower’s most recent annual or interim financial
statements did not contain a going concern note, qualification or note of
emphasis (other than directly related to the tariffs and countermeasures)
or the Borrower can demonstrate to the reasonable satisfaction of the
Lender that it was solvent as at December 31, 2024.
How much assistance is available?
Canada is making available loans of $30 million and above, based on the applicant’s estimated cash needs over the next 36 months net of available liquidity. The loan size for each applicant will be assessed on a case-by-case basis based on demonstrated need, the reasonableness of management’s business plan assumptions and the ability to repay.
What is the application process?
Applicants should submit an enquiry form via the CEEFC website at https://ceefc-cfuec.ca/. A CEEFC representative will promptly send applicants a non-disclosure agreement, application form and instructions. The application form will request important information relating to the applicant and its current financial condition and its projected cash flow requirements.
Is there a deadline?
The LETL facility will be open while the current economic situation persists. Availability of advances is subject to satisfaction of conditions precedent at closing and prior to each subsequent draw.
What are the terms and conditions of the loans?
The terms and conditions will be commercial in nature. The key terms are provided below:
- Size / Principal Amount– the loan will be provided by way of two loan facilities: an unsecured facility equal to 75% of the aggregate loan; and a secured facility equal to 25% of the aggregate loan amount. The minimum aggregate loan will be $30 million. The loan may be advanced in tranches, once per fiscal quarter, during a 36‑month availability period.
- Interest Rate– with respect to the unsecured facility, Term CORRA (three months) plus 200bps, payable on calendar quarters in arrears. Beginning on each anniversary of closing, the margin will step up by 200bps per annum, up to a maximum of Term CORRA (three months) + 1000bps. Interest may be paid in‑kind for the first two years of the loan (subject to no default). For the secured facility, the interest rate will be the interest rate of the borrower’s existing secured term debt.
- Term– the duration of the unsecured facility will be seven (7) years. The duration of the secured loan facility will match that of the borrower’s existing secured debt. The borrower may prepay the loans and accrued interest 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; (ii) executive compensation restrictions for named executive officers; and (iii) restrictions on transferring equipment, assets, employees, production or operations outside of Canada.
- 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 climate commitments. (first report due by June 2026; aligned to TCFD recommendations; supporting Paris Agreement and net‑zero by 2050 goals).
- Governance– CEEFC 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, intercreditor arrangements on terms acceptable to CEEFC, security documentation and registrations (for the secured facility), and customary corporate, AML and legal opinions.
How will CEEFC be compensated?
The LETL facility is designed to help Canadian companies, whilst also protecting the interests of Canadian taxpayers.
Taxpayer protection:
- If the borrower is a Canadian public company (or a private subsidiary that is majority-owned by a public company, including foreign public companies whose shares are traded on certain recognized international exchanges), the borrower must grant warrants to CEEFC, with an option to purchase the borrower’s (or parent public company’s) common shares with an aggregate exercise price equal to 20% of the principal amount of the unsecured facility. One‑half of vested warrants will expire if the unsecured facility is repaid in full and terminated within 36 months of the initial advance. The warrants will enable CEEFC to share in the upside of the borrower’s recovery. These warrants may be settled with the borrower prior to being exercised or sold to third party buyers after the loan is repaid.
- In all other cases, the borrower will pay a fee equal to 6⅔% of the unsecured component of the facility and, if the facility is not repaid in full and terminated within 36 months of the initial advance, an additional fee equal to 6⅔% of the unsecured component of the facility will be payable at the maturity date of the unsecured component of the facility.
In addition, the borrower will pay a 25bps transaction fee to CEEFC on the closing date and reimburse CEEFC for costs and expenses, including advisor fees.