Remarks by: Stephen Poloz
Senior Vice-President, Financing Products Group
Ottawa - June 11, 2009 

Thank you Mr. Chairman.

We are pleased to have this opportunity to report to the Members of this Committee on our progress in helping Canadian businesses access more credit.

Since our president last met with you, the volume of demand for our credit insurance in particular has grown at a swifter pace than we have ever
experienced.

By the end of April, for example, we had already exceeded the number of new credit insurance transactions for all of last year.

As you are aware, Export Development Canada provides practical financial tools and market expertise that helps Canadian companies reduce their credit risks and expand their business internationally.  This is more important than ever during this credit crunch, when traditional financial institutions are highly constrained in their activities.
 
On the financing side, for example, EDC provides:

• loans and lines of credit to foreign companies buying from Canada;
• loans to help Canadian companies invest in projects or operations abroad;
• guarantees to banks, making it easier for them lend to exporting companies; and
• equity financing, either directly to Canadian firms or through private equity funds

As well, EDC’s credit insurance not only protects firms against the risk of non-payment, it also acts as security that increases their borrowing power with their banks.

We do all of this directly and in partnership with private sector financial institutions.  And we do it on commercial terms, without annual appropriations from Parliament.

Before I talk about how EDC is helping companies gain access to more financing during this credit crunch, I’d like to outline our experience in 2008. 

Thanks to prudent financial practices in better times, EDC was able to step into an expanded role last year, taking on the most business in our corporate history.

• EDC served over 8,300 Canadian companies, an 11 per cent increase over 2007.
• EDC facilitated $85.8 billion in exports and investments, up 23 per cent over 2007.

Of this total:

• $22 billion represents business in emerging markets, a third more than in 2007.
• $14 billion was done in partnership with Canadian and foreign financial institutions – up 20 per cent.

As you know, the Government also turned to EDC to help address gaps in the domestic credit market.

It boosted EDC’s share capital -- and the Government’s ability to add more capital -- and broadened our mandate and scope of activity for a two year period.   
 
The Government also raised the limit for our Canada Account from $13 billion to $20 billion.  This lets it support transactions in the national interest -- administered by EDC. 

For example, as at May 31st, EDC had nearly $9.5 billion in loan commitments under the Canada Account, including $4.2 billion in financing for General Motors and Chrysler, to assist them as they restructure. 

Importantly, our domestic activities are being done in cooperation with the private financial sector and BDC. 

In April and May, EDC established new arrangements with Canada’s major credit insurance providers, banks and surety companies to collaborate on domestic credit insurance and domestic bonding – through reinsurance or guarantees.

We expect these arrangements to add $3 billion in new financial capacity to the domestic market to help Canadian companies get through the recession. 
Here’s basically how it works:

• EDC provides re-insurance or a guarantee on part of a transaction amount;
• The bank or insurer reserves less of its own capital to take on new risk; and
• It can then provide more credit to Canadian companies.

In addition, through the Government’s Business Credit Availability Program, or BCAP, EDC and BDC are collaborating with Canada’s banks to add financing capacity to the market. 

Together, we are providing loans at market rates to firms with viable business models, whose access to financing would otherwise be restricted.

We also meet regularly, along with representatives from Department of Finance and Bank of Canada, to share information and search for more effective ways to collaborate.

Let me now provide a snapshot of EDC’s activity in the first four months of this year:

• Our financing and insurance volumes for Canadian companies reached $22.5 billion, just above what we did this time last year
• Credit insurance is by far our most important financial tool – at $16.4 billion, it was nearly five times our financing volume
• Our export business volume in emerging markets reached nearly $5.6 billion.  That’s tracking about the same as our results at the same time last year, in spite of today’s more troubled economy
• By region, we’re seeing the most activity in Western Canada, at 38% of our volume, a third in Ontario and 26% in Quebec – that’s a shift from the same period last year, when our volume in Quebec was slightly more dominant than in Western Canada
• Looking at a couple of highly-challenged sectors:  EDC served 446 forestry companies for a total business volume of $2 billion. Nearly half of our customers in the forestry sector are from Quebec
• In the automotive sector, EDC’s commercial business reached a volume of nearly $1.4 billion– receivables insurance took up almost $1 billion of that amount
• Overall, we served about 600 more customers to the end of April, compared to that period in 2008 -- some 7,100 companies in total.  This compares to the 8,300 customers I mentioned earlier for all of last year.

And this barely takes into account our new domestic transactions that are just now coming on stream.

Seen against the 22 per cent forecast decline in Canadian exports this year, this strong demand for our services is even more noteworthy. 

Finally, I’d like to give you an idea of our latest developments:

On March 18th, EDC committed up to USD 40 million in a USD 180 million renewal of a syndicated facility for New Flyer Industries. This Winnipeg-based company manufactures transit buses, with a focus on energy-efficient vehicles. The syndicate of lenders included Scotiabank and Bank of Montreal.

Just last week, both EDC and BDC, along with GE Capital and the Nova Scotia government, announced we are providing $57 million in debt refinancing for Clearwater Seafoods, a Canadian icon in that industry with well-established markets around the globe.

Those are just two examples of how EDC is making use of the additional flexibility granted in this year's budget.

By the end of May, we had signed nearly $100 million in loans under our temporary domestic powers, and there is more than $700 million in the pipeline so far.

The take-up on our domestic bonding reinsurance and guarantees, by both surety and banking partners in Canada on behalf of their customers, was almost $19 million, with more than $900 million currently under review.  On the domestic credit insurance side, we are in the process of completing the various partnership agreements.

As you can see, EDC is working hard to help Canadian companies through this economic downturn. 

I’d also like to reiterate that we operate in the commercial sphere, just like a bank or insurance company.  We do not provide subsidies of any kind to any industry – our customers must have viable business plans to show they can honour their financial obligations.

As we move through 2009, we will continue to provide more companies with the additional access to financing they need to survive and compete beyond this recession.

Always, we are focused on the benefits we provide to Canada.  In 2008, EDC helped generate 4.4% of Canada’s GDP and supported 572,000 Canadian jobs. 

Thank you.  I welcome your questions.