Large Employer 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 short-term financing to help these enterprises preserve employment and operations until they can access more traditional market financing. The LETL facility will be delivered through Canada Development Investment Corporation (CDEV) via its subsidiary, Canada Enterprise Emergency Funding Corporation (CEEFC).
Key features of the loan program and its terms and conditions are modeled on the Large Employer Emergency Financing Facility (LEEFF), implemented and managed by 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 $300 million, or more, in annual Canadian revenue; and c) require a minimum loan size of $60 million. Large for-profit enterprises in all sectors can apply for funding under the LETL facility. Certain not-for-profit enterprises may also be eligible. Companies that have been found guilty of tax evasion are not eligible.
Companies seeking support must commit to minimizing loss of employment, sustaining their domestic business activities and must demonstrate that funding under the LETL facility forms part of their overall transition plan to return to financial stability.
How much assistance is available?
Canada is making available loans of $60 million and above, 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 based on demonstrated need, the reasonableness of management’s business plan assumptions and the ability to repay.
What is the application process?
Applicants should register their interest at info@ceefc-cfuec.ca by submitting a completed enquiry form. 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.
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 no more than 80% of the aggregate loan and a secured facility equal to no less than 20% of the aggregate loan amount. The minimum aggregate loan will be $60 million. The loan may be advanced in tranches, once per fiscal quarter over 12 months;
- Interest Rate – with respect to the unsecured facility, Term CORRA (three months) plus a predetermined premium, payable on calendar quarters in arrears. The premium to Term CORRA will increase by 200 bps per annum. Interest may be paid in-kind for the first two years of the loan. For the secured facility, the interest rate will be 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 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;
- Governance – CEEFC will reserve the right to appoint an observer to the board of the borrower; and
- 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.
How will CEEFC be compensated?
The LETL facility is designed to help Canadian companies, whilst also protecting the interests of Canadian taxpayers. In addition to the security interest on the secured facility and the interest rate charged on the unsecured facility, if the borrower is a Canadian public company (or the private subsidiary that is majority-owned by a public company), the borrower must grant warrants to CEEFC, with an option to purchase the borrower’s (or parent public company’s) common shares based on a meaningful proportion of the principal amount of the unsecured facility. 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. Borrowers without publicly traded shares will be required to provide CEEFC with compensation in the form of additional fees, at a level commensurate to the value of the warrants for public company borrowers.
In addition, the borrower will pay a transaction fee to CEEFC on the closing date.