Canada Enterprise Emergency Funding Corporation (CEEFC) and Innovation Science and Economic Development Canada (ISED) – Large Employer Emergency Financing Facility (LEEFF) (2021)

Comments on Funding:

Funding will take the form of 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.

Loan terms and conditions:

• 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: 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.

In addition to the security interest on the secured facility and the interest rate charged for the loans, if the borrower is a Canadian public company (or the private subsidiary of a Canadian public company), the borrower must issue warrants with the option to purchase the borrower’s (or parent public company’s) common shares totaling 15% of the principal amount or receive cash consideration equivalent to the value of the warrants.

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