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TORONTO, April 22 (Reuters) – Canada’s export credit agency will support lending to hard-hit oil and gas producers, according to a document viewed by Reuters, as part of Ottawa’s latest move to free up credit for the struggling energy industry.
The relief comes as banks revise borrowing limits in the sector and could avert the bankruptcies of small and medium-sized energy companies hit by collapsing oil prices.
Canadian banks have relaxed some lending standards, but are expected to reduce their credit lines by recalculating the borrowing bases of energy companies to account for a 75% drop in US oil prices since the start of the year.
The “dramatic drop in prices will force new borrowing base determinations down, in some cases below the level at which current facilities are drawn,” Export Development Canada (EDC) said in a slide presentation. dated April 17.
Under the program, called a reserve-based loan guarantee, the agency will back up to 75% of a bank loan, up to a maximum of C $ 100 million, for at least one year, according to the. document.
“EDC will provide additional collateral beyond (the banks’) borrowing base to partially mitigate current oil prices,” he said.
EDC did not immediately respond to questions.
The program is aimed at Canadian companies whose production does not exceed 100,000 barrels of oil equivalent per day, according to the presentation.
Canada on Friday announced it would provide C $ 15 million to C $ 60 million in commercial loans to producers through the Business Development Bank of Canada, in addition to C $ 2.5 billion in aid. dollars ($ 1.8 billion) to help industry cope with the fallout from the COVID-19 pandemic.
Alberta Premier Jason Kenney has estimated the industry’s liquidity needs at between C $ 15 billion and $ 30 billion.
Finance Minister Bill Morneau said on Friday more needed to be done to ensure large businesses have access to credit, and promised details soon. (Report by Jeff Lewis edited by Marguerita Choy)
