Industry Committee on Nov. 25th, 2009

[Robert Vincent, Bloc, Shefford, QC]

I think this is an important point, because in the case of large contracts...This is not so much of a problem with small and medium-sized businesses. If a contract is awarded to a small business, or if a small business bids on a contract, I would imagine that this firm would be able to manufacture the product right here and not have to outsource production.

[Richard Rémillard]

As far as I know, this is the current rule. In the case of a $1 billion contract, there have to be some offsets here in Canada, that is to say, some of the products must be manufactured in Canada.

[The Chair, Conservative, Michael Chong]

Thank you.

We will wrap up with Ms. Coady.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much. This has been most informative. I'm going to be rapid-fire, as we only have five minutes left and I have four big questions. So if you could be very succinct in your remarks... I'm going to ask all the questions first.

Mr. Campbell, please comment on the Small Business Loans Act and whether or not it needs improvements. What do you think needs to be changed in that?

Mr. Halde, if you could, on the subordinate financing, I'm quite interested in how that's working, of course, as a combination of a loan with some kind of stock option equity issue. I'd like to know whether or not that's working. Has it increased or decreased, regional versus industry?

Mr. Hayes, you mentioned syndication and said you were concerned about it. Could you elaborate on your concerns?

Mr. Rémillard, I want to talk about the procurement that you mentioned. The Sikorsky deal, of course, was the big helicopter deal that we did, $3.5 billion. There was a $50 million investment pool. Was that successful? Should we be encouraging government?

Most importantly I'd like to encourage the government that this is a very serious issue. Access to capital is going to continue to be a very serious issue. We talked about a perfect storm and this is it.

Mr. Campbell first, please.

[Terry Campbell]

Very briefly, I would characterize the Canada Small Business Financing Act as a work in progress. Minister Ablonczy has made some changes that I think are very welcome; the thing that stands out most is increasing the size of the loan. We certainly welcomed it, we had asked for that, and we're quite pleased by that.

Where I say it's a work in progress is I think our bankers still find there is a lot of administrative burden that makes it difficult to use. It acts as a bit of a disincentive to have the most effective use. So I think there's some good work so far, but there is more work to be done.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you.

Mr. Halde.

[Jean-René Halde]

The subordinate financing--just to explain exactly what it is--is a type of lending whereby the business owner should really be putting equity in the business, but instead of that, he's getting a loan. The risk of the loan is really an equity risk because you're so far down behind all the banks and so on that it is equity.

That has been doing very well. We do in excess of $100 million of that type of lending per year. It's been profitable every year, but it needs a very special team to do this type of lending because you're really buying into the business plan and the management capabilities, not on the balance sheet.

Thank you.

[Thomas Hayes]

In terms of more syndicate partners, I think I would refer back to the five-point plan that Richard outlined that has been blessed and put forward by the CVCA. I think if government were to follow some or all of those recommendations it would result in a greater number of players in terms of providing VC to the industry here in Canada, and we'd partner with those.

[Richard Rémillard]

I guess I've got a two-part answer to your question. On the big issue of procurement, it has not passed unnoticed that governments collectively invest huge amounts of money in information and communications technologies. The question is if that purchasing power is being used most effectively.

With respect to Sikorsky, that was one of two deals in the past 10 years, and the way it was explained to me was that Sikorsky had such huge offset obligations that they didn't mind spending a couple of million bucks and putting it into a little venture capital fund. But the key thing to retain from that is there has been one other deal in 10 years. Why not more?

[The Chair, Conservative, Michael Chong]

Thanks everyone. Thank you as well to our witnesses.

Thank you very much.

This meeting is adjourned.