Fisheries Committee on June 11th, 2009

[Edmée Métivier]

Yes, exactly.

[Scott Andrews, Liberal, Avalon, NL]

Under the BCAP, you mentioned the five areas. One of them was refinancing, and you related to foreign policies, foreign...?

[Edmée Métivier]

Foreign banks.

[Scott Andrews, Liberal, Avalon, NL]

Foreign banks. How would the impact on the Icelandic banks have an impact on you, the problems they have? Would companies that normally dealt with them then be able to come to the BDC?

[Edmée Métivier]

Some have. As a matter of fact, there are two ways. When this bank failed, a lot of these companies didn't have alternatives. They either knocked on our door or knocked on the door of a financial institution. In some cases, the financial institutions have come to us to share the risk. I am aware, for instance, of two or three cases that we have looked at in the last 90 days, where we're about to replace the Iceland bank. We did one, actually, in the last 10 days—a financing that was publicly announced. It's a company you would know. We replaced in part—not all of it, but in part, with other financial institutions—the departing banks at the time.

[Scott Andrews, Liberal, Avalon, NL]

I have one last question, then I'm going to pass it over.

In your beginning, you said you were there when companies have access to credit that is restricted. What did you mean by credit that was restricted but they could come to you for access to that credit? How could one's access be restricted but then you guys would fill in a gap?

[Edmée Métivier]

The BCAP program was a collaborative effort, so instead of a bank declining a transaction—for instance, because they have reached a limit internally, either on the sector or for the borrower—instead of declining access to credit, they would refer it to BDC. That's what I mean by a limited access to credit. In some cases, for instance, a bank could have a limit on a borrower, a limit in the sense that we don't want to exceed $50 million or $40 million. This is not really the reality of the smaller transactions. It's more the mid-size companies where you're going to see that. So the bank, instead of declining access to credit, will simply phone BDC and ask us to share this transaction. Then we'll do it 50-50 or we'll take a portion of it. That's how we make it available.

Why it was needed is that BDC has hundreds of branches across Canada. It's relatively small in terms of reach. It doesn't have the same number of branches as financial institutions, so by working in collaboration we were actually trying—and that's what we've been doing—to make sure that access to credit continues to be there.

On the $600 million that we did under BCAP, in a recession the activity of BDC would diminish, decrease, because normally the entrepreneurs are not likely to make new projects. They'll wait until the time is better for them. It's just the economy of the project. What we've experienced in this recession is an increase in our activity, which is counterintuitive. Why? Because the marketplace all of a sudden lost many players; they just disappeared, like the Iceland bank.

[Scott Andrews, Liberal, Avalon, NL]

Thank you.

[Edmée Métivier]

You're very welcome.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Madam, you said the bank currently has a loan portfolio of approximately 400 clients. Is that correct?

[Edmée Métivier]

The BDC. I think the exact number is probably about 380.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Okay, 380, but there are about 26,000 fishermen in Atlantic Canada, incorporated or non-incorporated enterprises, so in other words, the BDC has a very small footprint in terms of the fishery itself.

You mentioned co-writing lines of credit. You mentioned earlier about how a private sector lending institution may indeed want to provide a line of credit, but the risk, of course, has been increasing. So what would be the footprint of the BDC in that regard?

[Edmée Métivier]

Prior to the recession, BDC had never actually offered an operating line of credit. We are not in that business. We are in the business of financing projects, and the projects are normally the purchase of fixed assets or the expansion of a market, or if you want to develop a new product, we provide term financing, which is normally for three years up to about 30 years. So we're a long-term lender.

This recession is different from the previous recession, because normally the operating facility was well covered by financial institutions, including the foreign banks and including the non-regulated players. Now some of them have completely gone out of our market in Canada. So the banks and financial institutions have been attempting to fill the market gap but, quite frankly, will not fill the whole market gap. So BDC was asked to provide a guarantee on an operating facility to facilitate the maintenance of an operating facility or in some cases the increase of operating facilities. But normally we're not a player in an operating facility.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

What would be the numbers, then?

[Edmée Métivier]

For operating facilities, the guarantee is about to be launched as soon as it is announced by the Canadian government. So it's just about to be put in place.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Are you anticipating...? Obviously you've crunched the numbers--

[Edmée Métivier]

Yes, we're anticipating about $300 million over a period of 18 months.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Do you have any idea how many clients that would represent in terms of small transactions?

[Edmée Métivier]

In small transactions, that would be 350 to 400 average probably, so I would say that's just about $300 million over that.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

That's actually quite relevant. Right now, the BDC is a significant player probably--I don't know for sure--in the larger loan portfolio, mostly to the processors, I would imagine, or to larger offshore vessel owners. But the inshore--and we're examining the lobster fishery here---is made up of a group of 10,000 fishermen who have enterprises that probably would draw upon lines of credit of anywhere from $25,000 to $100,000 to $150,000.

What we're seeing and what I'm hearing is that the BDC has not been a player in that. And I'm not blaming, I'm just trying to state a fact.

[Edmée Métivier]

It has not been in the operating facility, you're quite right. But we have actually some of these processors as well as fishermen as clients for the long term, there's no doubt.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Yes, there are about 380 of them in total--

[Edmée Métivier]

Exactly.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

-- out of a pretty large field.

[Edmée Métivier]

I think what I could suggest to you is that probably a certain number of these that you're looking at could benefit from having the operating line of credit guarantee when it is available.