Evidence of meeting #14 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was positions.
A recording is available from Parliament.
4:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
So it's a separate recognition in the books of EDC, both for the investments in the Canada account and the writeoffs in the Canada account?
4:35 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
Excuse me?
4:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Is it a separate recognition in the books of EDC that the Canada account's assets be recognized there, but also its writeoffs be recognized there?
4:35 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
They are separate. Clause 1831 refers to what types of transactions EDC management can enter into to decrease the risk on their own account, whereas 1833 has to do with transactions they can enter into to diminish the risk on our behalf—so on our books, on the government's account.
An example of this, for instance, can be when airlines have difficulty paying back loans that were distributed for the purchase of aircraft. When the airline goes to a bankruptcy court, EDC can easily, on its corporate account, restructure its loans. Here again, what is being sought is clarification of the current wording in the act to enable EDC to basically do the same type of restructuring on our own, on Canada account exposure, that it can do on its corporate account exposure.
4:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
If the Canada account has lent money on an airline and the money is not paid back, or only part is paid back, what I don't understand is how is that treated differently than the way you do your corporate accounts?
4:35 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
For instance, if the bankruptcy court, or if there's a negotiation for the restructuring of a loan, if the negotiation with the airline has any writeoff of any amount of interest or capital on the loan, EDC doesn't have to go and get extra authority to accept what it deems to be the best deal possible for its bottom line. If it writes off one single penny of it, it can still accept that restructuring deal, whereas there were lawyers in EDC who were working for us on Canada account who wanted more clarity to make sure that they could accept what they deemed to be the best negotiation for the transaction that was made under the Canada account, and they want it to be—
4:35 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
Excuse me?
4:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
What does Mr. Clement do now when the lawyers are negotiating a resolution of a debt on the Canada account? How is it handled, and how are you proposing that it be handled differently?
4:35 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
My understanding is that Export Development Canada is a crown corporation that is arm's length from the government, so I don't see what Minister Clement has to do with this.
4:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Okay, maybe I'm missing something here. You're asking for an authority to enter into a transaction, including “the forgiveness in whole or part of any debt or obligation that is necessary for the management of assets and liabilities”. Generally that means we have a lousy piece of paper here, we need to get rid of it and we need to write it off.
What I find puzzling—and correct me if my understanding is incorrect—is that the lawyers for the corporate account, EDC account, make their deal, end of story, but on the Canada account...they want to make their deal, but what happens that they can't make their deal?
4:35 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
They wanted to make sure they could accept the same deal on the Canada account. They wanted to make sure they could accept this deal even if it incurred a loss of either interest or principal on the loan.
4:40 p.m.
Liberal
4:40 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
Actually, the reason this legislation has to be clarified is specifically related to an example such as the one we are talking about.
EDC officials were present in a bankruptcy proceeding case in the U.S. They accepted the deal under corporate account and they were wondering if we could actually accept the same deal on Canada account. It took a lot of negotiating, weeks of deliberations between lawyers between various departments. It was deemed at that time that we could do it, but at any opportunity one would want to clarify this and make sure the act does permit this to be done.
4:40 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Are there any specific historical examples where this was in question? I understand Mr. Wallace doesn't want to answer any questions directly, but are there any specific historical examples of this?
4:40 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
I would have to check. As you may imagine with Export Development Canada, there are commercial sensitivities in talking about bankruptcy. I'd have to actually check with them on whether I could share those examples.
4:40 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Well, the Canada account tends to be a bit politically sensitive. You seem to be asking for shall we say more extensive authority for the resolution of problem loans.
4:40 p.m.
Conservative
4:40 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Well, the Canada account.... Yes, proposed subsection 23(6). Absent of context, you're left to deal with theoretical constructs. What I don't understand is what additional powers the department is asking for to deal with the Canada account.
4:40 p.m.
Conservative
The Chair Conservative James Rajotte
It states there are no additional new powers granted.
Is that correct, Mr. Hall?
4:40 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
That is correct.
4:40 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
It says:
to make an investment or enter into any transaction including the forgiveness in whole or in part of any debt or obligation that is necessary for the management of assets....
If it wasn't necessary, why is it there?
4:40 p.m.
Chief, Export Finance Section, International Trade and Finance, Department of Finance
As I previously mentioned, the clause is meant to clarify the current understanding of the powers that are already granted to Export Development Canada under the ED Act.
4:40 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
This format and this process is not very good, in my view, but I'll let it go.
4:40 p.m.
Conservative