Canada’s Sunwing secures C$375mn loan to save jobs

Thousands of jobs may have been saved at Sunwing Vacations Inc. and its low-cost subsidiary Sunwing Airlines (WG, Toronto Pearson) after North America’s largest travel group was granted a CAD375 million Canadian dollar (USD293.2 million) loan by the Canada Enterprise Emergency Funding Corporation (CEEFC). Sunwing Airlines and Sunwing Vacations together provide almost 3,000 Canadians with full-time jobs. The loan, of which CAD50 million (USD39 million) was drawn on February 1, is granted under the Large Employer Emergency Financing Facility (LEEFF) to protect jobs in Canada’s airline sector. In return for the loan, Sunwing has agreed to maintain an account with money received from customers for travel that was cancelled by either Sunwing or the customer due to the COVID-19 pandemic. This account will be maintained until the Canadian government’s broader discussions with the airline industry conclude and a policy is established for the treatment of these prepaid amounts. CEEFC is a federal Crown corporation established last year that is wholly-owned by the Canada Development Investment Corporation (CDEV). It administers the LEEFF loans which aim to provide bridging financing to Canada’s largest employers whose needs during the pandemic are not being met through private market financing. It provides large Canadian employers with access to credit to preserve jobs and continue operations during the COVID-linked economic downturn. In return, companies must agree to sustain their domestic operations, make reasonable commercial efforts to minimise the loss of jobs and demonstrate a clear plan to return to financial stability. They must also agree to place restrictions on executive compensation, dividends, and share buy-backs. LEEFF may not be used to resolve insolvencies or restructure firms, nor to provide financing to companies that otherwise have the capacity to manage through the crisis. In order to qualify for LEEFF, a company must have more than CAD300 million (USD234.8 million) of annual revenues and require a loan of at least CAD60 million (USD46.9 million). Certain not-for-profit enterprises, such as airports, may also be eligible. Companies that receive a loan through LEEFF are required to publish annual climate-related disclosure reports on how their future operations will support environmental sustainability and national climate goals. The loan to Sunwing is the biggest LEEF financing yet, following on CAD200 million (USD156.3 million) granted to Gateway Casinos & Entertainment Ltd in September 2020 and XAR120 million (USD93.8 million) to coal mining company Conuma Resources Ltd in January 2021. Sunwing operates a fleet of sixteen leased aircraft, including four B737-8 and twelve B737-800s, according to the ch-aviation fleets advanced module. It serves popular Canadian sun-seeker holiday destinations in Mexico, Cuba, Guatemala, and the Dominican Republic.