Fisheries Committee on June 11th, 2009

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

Based on your knowledge of public policy and the overall assistance to financial markets provided by the Government of Canada, what has been available for the last six months or so? What improvements have been made that fishermen, that enterprise owners could actually tap into, say in the month of April or May when they really need it? We've heard expressions that there has been increased access to capital. The evidence doesn't seem to point in that direction, though, when you look at BDC only having a loan portfolio of 380 in the fishing industry as well as the fact that it has does not provided access to lines up until now or soon to be--

[Edmée Métivier]

Exactly.

[Berry Byrne]

What other things have been available to small enterprises that are going through a rough time?

[Edmée Métivier]

I think there are two things. The ones who are really in dire need at the moment are the ones who didn't have a relationship with a financial institution.

Allow me to be transparent here. The second piece is that some of these players had difficulty even before the recession. So one could argue that perhaps their business model wasn't the right one even before the recession, so it's even harder for them today to find financing.

There will be a restructuring of the fishery market or the sector. The sector will have to restructure to some degree. There are players who are well positioned, actually, to take advantage of that. These people are able to raise financing today if they have a relationship with the financial institution.

As for BDC, we have the working capital support program, whereby we look at a company and if we feel that company can actually go through this temporary period of difficulty and succeed, we will support them. So they can have term financing, and in some cases for our clients, we've simply given them a non-repayment period of time so that they can preserve their working capital.

[The Chair, Conservative, Rodney Weston]

Thank you very much.

Monsieur Lévesque.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Thank you, Mr. Chairman.

Mrs. Métivier, I do not have many questions to ask you. You were very clear in your explanations, as well as in your answers. However, there is something I am wondering about.

As far as interest rates charged to businesses, is the BDC, the Business Development Bank of Canada, competitive compared to other banks?

[Edmée Métivier]

That is a very good question.

In fact, I would refer you to the Business Development Bank of Canada Act. The BDC must work in a complementary fashion in the marketplace. As a result, if it takes more risks, it also has to charge a little more. The answer to your question is that we have a slightly higher risk premium than the other financial institutions.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

About the same as the CDIC.

[Edmée Métivier]

I could not say what the CDIC fee structure is. I am sorry, I do not have that information.

As far as the BDC is concerned, if we compare ourselves to a traditional financial institution, we always charge a little more; it is around 50 basis points and often a little more.

It also depends on the risk we are going to take. You must understand that in some cases, we have no security. Also, we bill as a result of the risk taken by the BDC. In the end, we have to be profitable. The BDC has to have the ability to fund its activities.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

If ever the Department of Fisheries and Oceans provided, for example, loan guarantees to fishing firms in certain sectors and during certain periods of time, could this improve the interest rate that the BDC might charge its clients?

[Edmée Métivier]

We did so in the past in certain very specific cases. Within the history of the BDC, there have indeed been times when certain departments chose to guarantee part of the risk premium. This is therefore something we could consider.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

I will ask my colleague if he has any other questions to ask.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Mr. Chairman, I have a supplementary question.

Mrs. Métivier, you speak about the profitability of the Business Development Bank of Canada. What is the rate of return on loans to the fishery sector?

[Edmée Métivier]

I do not have that information at the moment. The portfolio is performing as well as the rest of the bank. We do not have more loans in difficulty than in the remainder of the portfolio. It is more or less the same.

This year, the bank will be publishing its annual report very soon. You will have the opportunity to consult it. Our operations will break even, as you say in English: there will be neither profit nor loss, because last year we had a rather difficult year. Only the profits dealing with financial instruments will be shown. As far as the bank's own operations are concerned, the fraying of the portfolio was rather widespread last year.

Currently, the fishing industry is not the only one experiencing difficulty; so are the automobile and forestry sectors.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

You will probably help me explain the situation. I am under the impression that for the fishery sector—or the manufacturing and forestry sectors— the loans that are made are not necessarily higher risk loans than those in other sectors in the economy, like the mining sector, where there are very significant fluctuations.

[Edmée Métivier]

In fact you are right. This is a sector we have always worked with and we will continue to do so. The BDC will not abandon any sector because they are temporarily in difficulty. One-third of our portfolio is invested in the manufacturing sector. And this sector has already been in transition for two years now.

As far as the fishery is concerned, it is the same thing. It is a cyclical sector. We are aware of that and we live with that. We go through good times and bad times alongside our clients. Many of them have been with us for many years.

To answer your question, I would say that it is a cyclical sector with which one needs to have a bit of expertise in order to be a good lender, in the end.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Are your clients mainly processors?

[Edmée Métivier]

There are processors but also fishers. I was looking at these statistics. They show that in the case of fishermen, it is the number of loans that is high, whereas in the case of the processors, it is the amount of money. We're talking about approximately $82 million.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

What kinds of loans are made to fishermen and to what end? Are they for purchases, for repairs?

[Edmée Métivier]

It could be to purchase the building they are in or equipment they need for processing. In the end, the loans serve to purchase whatever they need to work well. We concentrate on the equipment they need in order to manufacture. In this area, loans pertaining to operations given by financial institutions affect operating funds, that is to say the money these people need in order to be able to buy and to produce.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Excuse me, but what you are saying is more applicable to processors. What about fishermen?

[Edmée Métivier]

In the case of fishermen, the applications concern boats, permits, in fact all the resources they need in order to carry out their activities.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

For what purposes did fishermen and processors come to see you over the last year? We are talking about a cyclical phenomenon. I would imagine that behaviours differ from one cycle to another.

[Edmée Métivier]

In fact, we have always had clients from the fishing industry. In order to understand the current changes in behaviour, you have to realize that the funding the fishermen and entrepreneurs want is for operating funds. This is what they need. They do not want money for investments: they do not have time to deal with that kind of thing. They just want to survive.

This is why the program we have set up to support the operating funds will help them even more than in the past, in my opinion. That is what we are trying to do.

[Raynald Blais, Bloc, Gaspésie—Îles-de-la-Madeleine, QC]

Thank you.