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Rationale: The current Provincial Fisheries Loan Guarantee Program (FLGP) provides a provincial guarantee on term loans provided by participating commercial banks to harvesters for the purchase, construction or upgrade of vessels, purchase of new engines and equipment (�eligible capital items�). During the renewal process it became apparent that changes were required to the program to address the needs of harvesters. Objective: Increase the maximum loan guarantee available to harvesters to keep pace with inflation and new vessel design and enhancement. Provide an alternative to harvesters to enable them to refinance existing debt, as it relates to eligible capital items, held by seafood processors. Support the changes to DFO�s harvesting policies. Description: The terms and conditions of this program are under consideration by the Province and will be available as soon as possible, following further consultations with chartered banks. The maximum loan guarantee limit was last increased in the early 1990s. During the past 15 years new vessel construction costs have increased significantly. The Province is considering amending the program to increase the maximum loan guarantee available to harvesters. Many enterprises currently have debt financed through processors which in effect gives the processor the right of first refusal for any species the harvester lands. During the consultation process, harvesters strongly supported the strengthening of the federal fleet separation and owner-operator policies. Therefore, refinancing of existing debt held by processors and other entities, as it relates to eligible capital items, will be considered. The participating banks are: Bank of Montreal, Bank of Nova Scotia, Royal Bank of Canada and Canadian Imperial Bank of Commerce. It is up to each individual bank to review the merits of an applicant and decide if they are prepared to provide a loan and seek a guarantee from the province. In essence, the loan must be a bankable deal supported by due diligence and appropriate security. There have been several discussions with the two major participating banks in the program (Bank of Montreal and Bank of Nova Scotia) over the past year. These two banks represent over 90 per cent of the loans under the program. There is a formal agreement between the Province and the participating banks and this will need to be amended to give effect to these changes. We will be consulting with all participating and interested banks over the coming weeks to finalize these changes. It is anticipated that the additional value of transactions from these changes could require an additional $100 million in loans which are guaranteed by the Province. The program to date has had an historically low default rate. A revised agreement will be required with the participating chartered banks in order to effect the proposed amendments to the current program. Estimated exposure $100,000,000 Guaranteed by the Government of Newfoundland and Labrador -30- Media contact:Danny Pond Communications Specialist Department of Fisheries and Aquaculture 709-729-6076, 685-3415 dannypond@gov.nl.ca |
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