Strategies to help businesses deal with COVID-19 financial liquidity issues

David:  Steve Ferguson. Say hi Steve.

Steve:  Hi everyone.

David: Is a managing director at Alvarez & Marsal, one of the world's largest turnaround and restructuring consulting firms. He has more than 15 years of turnaround consulting performance improvement, corporate restructuring and finance accounting experience. Last, but certainly not least, is Tom Cumming. Say hi Tom.

Tom:   Morning everybody.

David: Tom is the senior restructuring and insolvency lawyer at the Gowling WLG office in Calgary and he leads that practice in Calgary. Tom has over 30 years of experience in restructuring and insolvency and lending in the areas and has developed a reputation for providing really creative solutions to his clients. Tom's, again, appeared before all levels of court in Alberta and the Supreme Court of Canada and for those that might recognize him, he practiced in Toronto until 2001 and then moved his practice to Calgary.  That's the panel. Thank you all for joining and taking the time to participate in the discussion. I'm going to start by talking a little bit about liquidity. Liquidity is more than cash on hand. It becomes obvious when considered in the context of this financial crisis. Business is often viewed liquidity only as cash in hand. But in these times owners need to tap into new, many new resources, and new ways of finding liquidity for their businesses. Some examples that will be discussed today are obviously cash on hand, revenues from sales, might be dwindling a little bit right now, access to cash from existing or new lenders. They're there to help, sometimes. Collection of A/R from customers or the factoring of those receivables from customers. Deferring payments to suppliers while you're still trying to ensure that you get critical supply. There's a significant amount of discussion around government funding and government programs. We're going to discuss that in some detail today. Then you can cut fix your variable costs in your business. But where to cut and how to cut is always an open question. Last, but not least on the list of sources of cash, is equity injections.

Business owners and senior managers need to make their own decisions about how, and if, they cut costs in their business. They'll inevitably weigh in on the social and moral considerations that form part of that decision making. Look, it's not easy to lay off employees. It's not easy to not pay a supplier that you've relied on for years and you have a strong relationship. We all want to do our part in the economy and that's a big part of, and we see it Canada more than in the US, that's a bit part of the Canadian business ethos. But at the same time your business is no use if it doesn't survive and our presenters are going to have a conversation around that. This presentation speaks to the tools that are available to give business owners, and their stakeholders, the best and broadest choices. The format of the presentation is question and answer. There's not any visuals being put up on the screen. It's just a fireside chat between 5 people who've been in this business for a long time. I will ask a question to a particular panelist and then it's open for other panelists to provide their own comments. If you have questions, as an audience, you can pose them in the Q&A tab at the bottom of the screen. The questions will not be addressed until the end of the presentation and time permitting. This presentation will be recorded and it will be put up on the Gowling WLG website and made available to the audience along with some additional materials that will be linked to it, that have been here in support of the presentation. I'd like to turn to the panel and start the first question.

            Scott, this is for you. Business and social shutdowns have created an urgent need for liquidity for Canadian businesses and workers. How is the lack of liquidity affecting businesses at this point in the crisis?

Scott:  Thanks, David. The liquidity crisis is forcing very hard decisions on management teams. Decisions where there may be no right answer and they have to make these decisions while under significant, uncertainty and therefore stress. Everybody on this panel has spent years and built there career around operating at this level of stress and with these exact same issues. But management teams across the globe right now have been thrown into this fire and they don't have the tool set, necessarily, to deal with it. Let me give you a few examples.

Businesses are being forced to evaluate whether they ought to be operating or not. Who has to make that decision on a day to day basis? I'm sitting here in my beautiful hometown of Fernie, British Columbia, and the other day I went into my local butcher shop and was told to stock up because they were closing down that day. Closing down for a month, at a minimum, and they have no other plans. They're not going to renovate. They're not going to clean up. They're just going to go home and sit in their house for a month. That was their plan. That didn't happen in 2008. That didn't happen with 9/11. This crisis has literally changed the trajectory of every business on the globe. There's one example.

Cash flow. Number two. It's forcing business owners who have never, maybe, thought about their cash flow before and cash flow models and these source of tools, is forcing them to go through that process. There is no SMEs, small medium sized enterprise, that shouldn't have a cash flow model built to help them decide and make decisions during this crisis. David, you touched on it on your introduction, but to me it's forcing moral decisions. The greater good versus survival.
Do you lay off that employee, or that group of employee, when Government Canada has gone really far and tried to hard to create programs to entice you to keep those employees on board. It's a very difficult decision. There's a lot of uncertainty around it and I think the running out of cash, the liquidity part of this, just makes that stress and those decisions much harder. That's my view on it. David, you're on mute.

David: Steve, do you have anything to add to that?

Steve: I think it's a good summary but what we're seeing is businesses who have never had to worry about liquidity, start to have to decide and make actual decisions on who they are going to pay and who they are not. That's something that everyone on this panel has lots of experience in dealing with. But to Scott's point it's unprecedented. In fact, I heard from a client of ours that said that they hold a number of balls, that said only 40%25 of rents are received on time. So your seeing everyone having to go through and make these tough decisions.

David: Right. Okay. To follow up on that question to Scott and Steve, what's the road map to navigating through liquidity crisis on a short term basis? What should businesses do? Scott, why don't you start and then Steve.

Scott:  Sure. Thanks. I've got a 3 pronged thought process for this that I've walked through with all of my companies, those that we own and those that we advise, number one is, don't forget, were trying to make hard decisions, as Steve said, do you pay your rent, do you not pay your rent? By the way, if you're not going to pay your rent, talk to your lawyer first. That's a really complicated thing to be doing. So I'm not advising that. But to make decisions in uncertainty what do you need to do? Number one is you need to take a position. What I mean by that is when are we going back to work and what does that look like for a business? Are we going from zero, you're completely shutdown, to one hundred? Are you going to increment up over 6 months? You have to have a view. You have to have a position. Otherwise you can't make any decisions. You're just frozen with uncertainty. It doesn't matter if your view is right because you need to reevaluate that position every single day as you learn more. For me, I started self-isolating here in my home with my family around mid-March. I thought to myself how long is this going to last and what impact does that have on my business, on my revenue level? And I figured it was going to maybe cut us back, depending on the business, say 50 to 80%25, by the way the answer's been around 78, 79 I'm told, so far. But I took a position and I said to myself, well I think I'm going to be locked in here until the end of April, which is 6 weeks. My experience in troubled companies, and every troubled situations it takes twice as long as you think, be conservative. Double your time frame. So I said 12 weeks, which is 3 months, was from mid-March took me to mid-June, say the end of June, which I think is looking pretty good as a prediction, right now. So I said, okay, how do I survive until the end of June and what happens after the end of June? My view is it's going to be a slow buildup. It's not going to go from zero to a hundred. We're not just going to flip the light switch on. So you need to have a point of view. You need to take a position that you can then make decisions around. Number two, is you need priorities. When you can't have everything you want in life you need to prioritize. In a crisis like this, you need to prioritize, here's mine. The health and wealth being of my employees. Mental well being of my employees. That's priority number one. Number two, is also my employees, can they eat and pay their rent? Right? So I want to make sure that my decisions help them pay their rent and buy groceries. Number three is, a positive thing, that maybe you're not expecting, but I want to use this crisis to leapfrog my competitors by being aggressive and working hard, because I can guarantee you, all of your competitors are frozen with uncertainty right now. You notice in my priorities I didn't talk about liquidity. The reason is because liquidity's not a priority, it's a necessity. When I'm making decisions about who to pay and who not to pay, I turn to my priorities. Does it preserve the well being of my employees? Are they getting compensation? Either from me or a government program. Can they eat? Right? Then am I pushing my business forward and regaining my momentum, and then, into the third part, I move into a thought process on operations, cash flow, credit. Operations meaning if I'm permitted to be open in the jurisdiction that you're in, or you're allowed to be open, should you be open? If you're running at 80%25 or 50%25 of your revenue and you're losing money everyday, turn to your priorities. Does it make sense to be open? That's the operation side of it. Cash flow. Here's the worst thing you can possibly do, is you think well, this is going to be 3 months and then 2 months into it, you run out of money. That's not good and you're probably not going to recover from it. You need to plan your cash flow and you need to build a war chest because, in the end, when you come out of this you're going to do two things with that money. You're either going to pay back the people you didn't pay, right? Or you borrowed a bunch of money and you're going to pay that back. Or, you're going to use that money for fees with your lawyers and whoever else you're bringing as advisors, to do a formal restructuring to clean up your balance sheet to be a healthier company. You need money either way. So you need to build a war chest through this. You need to be aggressive up front. Third on the list there, so operations, cash flow, was credit. How are you going to handle your stakeholders? How are you going to keep them on side with your plan? That's my road map. My road map is take a position. Set your priorities and then review, with those in mind, your operations, your cash flow and your credit.

David: Scott, people are going to be really focused on their cash flow. It's a natural tendency in business to do that. Like you said, it's the necessity. I'm not asking you to predict how long this will take but is it realistic to tell somebody that what they need to have is a 13 week cash flow at this point? Or are you talking about doing a 26 week cash flow?

Scott:  Right. So 13 week cash flow is, for those of you that are operating a business and you're not used to that term, it's a really standard industry tool for everybody on this panel. You go to your lawyers, you go to your accountants and they work with troubled companies, first thing they're going to say is where is your 13 week cash flow? That's a week by week cash flow, your ins and outs of cash, and it's goes for 13 weeks which is 3 months. Okay? That's great. Every single filing that you see these lawyers on this panel doing, the 13 week cash flow is attached to it by the accountant, and it's a tool. And you need it. Except here's the problem. This is a bigger than 13 week issue. Right? If you think it's going to be 3 months, well, that's 13 weeks but then what? Right? You're not going to go, it's not a light switch, you're not going to go from zero to a hundred. And you borrowed a bunch of money and you didn't pay suppliers, so a 13 week cash flow's on a spreadsheet, extend it out, 26 weeks, 52 weeks, whatever. It doesn't matter. Your thinking needs, in this particular instance, it needs to go beyond the 13 weeks. I think, David, it's not good enough. That's my view on it.

David: You're spreading, and may be Steve can step in here, you're spreading your cash flow out over what you do have from all the sources that I mentioned in the very beginning of this conversation, you're spreading that cash flow out over a longer period of time. Because the premise seems to occupy people when they develop a cash flow is they don't think about what happens the day after the cash flow runs out. Maybe Steve you can step in and go further with it from there.

Steve: Yeah, I think one of the key things we always advise our clients is a forecast is wrong the second you print it. Because you're constantly getting new information. To Scott's point earlier, everyone should have a plan in place. For 3 weeks, for a month into this. If you don't have a plan in place it's not too late but you need to get it done. You need to get it moving. As you think about whatever time period is, a cash flow becomes a rolling forecast. So you look at what happened. What happened this week? How did my actuals compare to what I had forecast? What does that mean for next week? Were my collections greater? Were my disbursements lower? Did I build up a little bit of that thing? Is that a timing difference? Is that a permanent difference? Those are all words that you need to get into your vocabulary every week as you look at this and extend this cash flow out. Scott's made a great point. This won't be a flip the switch. Not only do we have to focus on what happens while we're all in self-isolation, we have to focus on the slow ramp up of the economy coming out of this, which may require further investment that you had not considered. I want to make sure that everyone on this call is thinking big. I mean big in terms of long time, in terms of war chest and in terms of how long it's going to take to come out of this. Because at the end of the day, we use the terminology all the time in our business, which is under promise and over deliver. If you under promise your cash flow, and you over deliver, that's a good problem to have.

David: Right.

Genevieve:      If I can add to Scott and Steve's point, I think it's important, I mean the cash flow indeed, the business plan is tied up with the relationship and the current communication that you have with your stakeholders. Once you determine what is key for you, as a business owner and what are your priorities, it's really important to keep communication and talking to those employees and those suppliers and the lenders that you have in place, to implement that plan.

Steve: Yeah, and I think, David, the other point and I know somebody other than Tom are going to get to this, there's a lot of government programs that are still unfolding. It would be my recommendation right now, if you can, to not rely upon those. I think that we're all really focused on what's out there. If you're sitting there, in your home office, waiting for a cheque to come in the mail, it's not a good strategy at this point in time. I think you need to figure out how to be self-sustaining and, if you can, definitely take advantage of government programs. Defer your property tax bill if that's what your municipality has allowed. Defer your tax bill if you're in a tax payment situation but don't rely upon government to bail you out.

Scott:  David, if I could just add on to the cash flow. We've put a free, obviously free, we put a 13 week template, a 13 week cash flow template on our website at Sinclair Range. So if anybody needs to know what that tool looks like, just go look up my website. There's a post there in the top 5 and you can literally just download a template and start filling it in or at least get the guidance from it, if that's helpful to anyone.

David: Right. And be realistic. This would not necessarily be the right time for optimism in terms of your cash flow. Conservative cash flows give you, you don't want to surprise yourself because part of this exercise in coping with the situation, is to make sure that you keep your own spirits buoyant and your own perspective buoyant. Don't let that get ahead of you. You win or lose the battle up here folks. We see it in our business over and over again. People determined to survive and the best chance of surviving. It requires a lot of hard work and a shoulder to the wheel and if you don't do that, if you sit back and you wait for it to happen, it's going to happen to you. You're not going to happen to it. Genevieve, you started a conversation there that we want to go onto next, actually, which is how should businesses approach their stakeholder partners? Maybe you could just talk about who those stakeholders are and then get into the beginnings of how do you approach each one and I'm sure every panel member here has a different experience they'll want to share.

Genevieve:      Certainly, David. I think the first step is to determine for each businesses who the stakeholders are. Were talking about employees, suppliers, ..., I mean the lenders, the shareholders. These are all stakeholders that are surrounding around your business so I think you need to determine who they are first and then who is key to the continuation, to the survival of your business, in this situation, and to the continuation of the business after the fact. As the economy starts rolling again. In terms of employees, I think it's important to determine, in terms of who are key, there's two aspects, so who is key to keep, I mean if your lights are on, who are the employees that are key to keep the lights on right now, and then who are the employees that are important to the continuation of the business after the fact? In terms of suppliers, who are your key suppliers, in terms of supplying you with the products that you need but also all the services that you need, but also in terms of relationship. As Scott mentioned it, at the beginning of this chat, there's a moral aspect that no one can ignore in a situation like that. I might be a consideration in the decision of which suppliers key and who's not. In terms of your shareholders, is there an access to liquidity that would be available from the shareholders. That's another aspect to determine.

David: It's interesting. On the point of employees, who is or isn't a key employee. Many businesses are completely shutdown. I have heard directly from corporate executives, owner/operators of businesses and from institutions, they're just not, from a liquidity standpoint, in a position to maintain the employment of all their employees. Think of all those restaurants, as simple example. They're hopeful that the government will in fact step in. The government has stepped in. The programs have to roll out, and they're not fully rolled out, but the expectation is that they will. But it was said to me that part of the planning for your employees is not just who's key to keep the lights on today, but who are you going to need on the other side of the V or the U? Because business is going to be shaped a little bit differently on the other side. We're going to talk about this a little later in the presentation about the future looking, the need to be future looking, but you're always going to have one eye on the future. Tom, I've asked you to look at the question of how you approach your lenders in these situations, so maybe you can weigh in on managing the lender relationship, in this environment, and what lenders expectations are, etcetera.

Tom:   Yes, what we've seen so far is that lenders are approaching the situations on a case by case basis. One of the first questions thinking about is pre-COVID-19, was it a performing lull or non-performing? Was the borrower financially viable? If it was non-performing, they tend to look at the question much more critically. If it was performing they will give a little bit more benefit of the doubt. Then they have to ask is the business fundamentally viable going forward? And what is it going to look like at the end of the crisis, or as the crisis ramps down? They want to know if the borrower has a well thought out plan for managing its liquidity and its come back and how it's going to function in whatever circumstances it's in. They look at whether the business is actually critical to what society's trying to do right now to manage with COVID-19. If it's a food provider, a medical service provider, that's going to be relevant. As is always the case, it's going to be very important that the lender has confidence in the management team. Has reasonable confidence in the information that they're receiving from company's management. They're going to look at what other stakeholders are doing. Whether other people are contributing to a temporary accommodation. Then, in terms of where we've seen flexibility to date, there's a variety of approaches. There's been deferrals that have been provided for set periods of time or deferrals tailored to the nature of the business. They look at the availability of government programs such as through the EDC, or BDC, and whether it would be helpful in the circumstance. They look at whether some interest relief can be provided although some lenders are actually looking for somewhat more interest, although it tends to balance out, because of the reduction rates by the Bank of Canada. They are willing to provide things like increased amortization so that the payment burden is reduced over time. There's principal deferrals that are sometimes talked about or margining more aggressively in favour of the borrower then they would traditionally. There is potentially a lot of flexibility in this situation. ... that too.

David: I think you're right. The interesting thing is that Tom, for people in the audience, Tom's sitting in Calgary and they have the perfect storm of a collapse in oil prices, which has a profound impact on the local economy. And the viability of the business. Whether it's inside of or outside of a COVID-19, now the collapse is related to COVID-19 supply and demand issues for oil and gas. But it has accelerated and I would say that Tom and the Calgary team, and Scott can comment on this because he's out West as well, are on the pointy edge of the deepest problem with Canadian businesses, or at least the earliest signs of it. What I've heard from lenders are that there's a lot of patience. Obviously there's a difference between whether you were already in a special loans unit at a bank or not, but there's a lot of patience. Even with the companies that had trouble before COVID-19, there's a lot of patience. That is in part because financial institutions have had a significant nudge from Ottawa to play ball. They've had their own liquidity eased and improved to Bank of Canada conduct and some of the requirements around, OSFI's requirements, around regulatory issues for banks. But at the heart of it is, banks want to have customers on the other side of this. But the single best piece of advice that Tom, and everybody on this panel have given so far is, get your plan together and have a smart plan because what you want to be is the most credible borrower and the easiest one to talk to about the issue, who is most well versed in the conversation, so that when you go into the bank it's not an I don't know. What can you do for me? I need another $800,000.00 liquidity to get throw this storm. Managing it by, I mean you don't have to be apologetic for COVID-19. It happened to you. It's happening to everybody. But you will have to apologize if you drop the ball and you're not ready for that conversation. The advice of this panel, I think, is consistent that you need to be able to step up and really do a great job on your presentation to the institution and be as ready as you can. They understand very well that you're dealing with drinking from a fire hose. They get it. And they actually do want to help, because like I said, they want customers on the other side. Scott, you were going to say something.

Scott:  I was just agreeing with you. When you go to the bank the approach and the attitude is everything. If you're a business owner, if you're a borrower, you're going to your banker. Think about being in sales and think about the other party. Think about your banker. Don't think about yourself. Your banker is overwhelmed, they're uncertain, no one knows where this is going, and they don't want to make a wrong move. What you do not do is show up and say, "Hey. How can you help me?" Right? You do not show up and say, "I don't have my 13 week or my plan in place. I haven't thought about my operations. I haven't thought about my cash flow. I haven't thought about putting more money into this and sharing the pain. How can you help me? What are the programs? How are you going to help me?" That's not what you want to do. What you want to do is go with a plan, as David just said, and you want to make a proposal that's almost as easy as yes, no. Here's the substance behind, Mr. Banker, here's the assumptions, here's my plan. l need from you 3 months of principal holidays. I want to talk about my margining because I used to get receivables to 90 days and not people are paying me 120 days. There's my proposal. Yes or no. And the banker may have great questions on the assumptions behind it but you're not putting the burden on them. You're giving them a way out. So, David, sorry for that. I was really just agreeing with everything you were saying.

David: No, I think you augmented what I said, considerably. Steve, do you have anything to add to that?

Steve: Yeah, the last piece is don't expect the lenders to solve your problem. It goes part and parcel with what Scott and Tom were saying. If you walk in there and say, "I'm doing this and I need you to do this." That's a much more ... argument than it is to go in there and say, like Scott said, "I don't have any money can you help me?"

David: Right.

Genevieve:      If I can just add, David, to this point. For those that are already in special loans unit, still make a plan. It's important. Make a plan and once you have your plan speak as soon as possible with your banker. The special loan departments in bank, there's people there that are highly experienced with situations where liquidity, or cash flow, are difficult. Still do your plans. Still speak to your banker and still come up with a solution.

David:   Can I dig down a little bit on a couple of other stakeholders here because I'm actually taking a look at what some of the questions that are coming up in the chats and some of them are a little bit too specific to the fact situation of the person asking the question and we won't be able to answer it today. But there's a theme in the questions that people are concerned about right now. People know that they've got a certain amount of cash. They know they can survive a certain period of time but they also know that they can't necessarily pay landlords. There asking about how to have that conversation and what will they do about a landlord that's hardball? Now, we're not advocating one way or the other for landlords, because landlords are our business in the exact same situation. But if your a customer of a supplier, and you're not paying the supplier, the supplier's going to want to have some recourse. What kind of a conversation can you have with a landlord? If they're not being reasonable it's likely because they're not in any better financial situation to deal with it, I suspect. They're businesses too. Does anybody have any thoughts on it?

Scott:  Treat them the same way as your bank. The law, I'm not a lawyer and you guys are probably smarter at landlord rights than I am, but they have a lot remedies. Just like your bank does. Treat them the same. Go to them with a plan, and a specific request, and a time frame and don't make it their problem. But remember, as Steve said, I think you said a mall, that 40%25 of the tenants paid their rent and 60%25 did not. Remember that you're not the only one, and they want a tenant at the end of the day, there's no good having an empty building. But they're not like the suppliers. It's not like you can just choose not to pay today. So talk to your lawyer, get some advice, and then treat them like your bank, would be my advice.

David: Okay. Sorry. I'm having a quick second of technical difficulty. There we go. So you said treat them like a bank. What about your suppliers?

Scott:  Who are you directing? To me?

David: Steve you can answer it, or Scott, you can answer it and Tom and Genevieve have a different perspective because they're dealing with it on a corporate basis all the time, from the legal perspective.

Steve: I think Scott may have alluded to this a bit. Your suppliers don't necessarily have a real pertinent recourse, immediately, other than threat of non-shipment. So when you're talking about critical suppliers, you're probably treating those very differently than you are non-critical suppliers. What I mean by that is I think at this point in time, if their plan can allow for it, what you want to try to do, if you don't want people supplying you goods you can't pay for. So if you move to a, call it, cash on delivery, cash in advance basis, for things that you can pay for and things that you can turnaround and sell and not on credit, that's a helpful scenario. The other piece to that is we look at this in this sort of zone. You want to try and not make your suppliers any worse off. What has happened has happened. COVID has happened to everyone. They are owed money. I think if your plan can support it then you try not to make your suppliers worse off and that's the discussion point your having.

David: Right. In a sense that's almost like asking them to park the pre-existing debt and potentially go COD on forward orders, or some near COD. Probably COD in this environment.

Steve: Yeah and the mechanics can vary. Whether you're paying off old stuff and getting credit for new stuff. But the practicality of it is that you may not be able to afford the paydown of all the stuff and therefore you need to have that tough conversation with them. That you try to keep them at least the same plane.

David: Okay. Switching hats, the customers. Your customers which you are the supplier to, obviously. Assuming your not dealing with the end consumer but are dealing in some kind of a wholesale environment, where you're selling on to a customer that you have racked up a receivable from, how are you collecting receivables in this environment, Scott?

Scott:  Communication with your customers. We're selling to a lot of big customers, so I haven't had a significant problem in our businesses, so you need to communicate. If you're cash flow isn't working and you need to accelerate cash you can always offer discounts. If you haven't given away the security to your bank, in other words you don't have an operating line, you can look at selling some of those receivables in a factoring arrangement. I mentioned before the idea, if you're bank has already margined those receivables, 85, 90%25 then worrying about that receivable will only give you another 10 to 15%25. It's really not a big deal. But the bigger deal is making sure that that 85, 90%25 doesn't drop off your borrowing base because the receivable aged past, whatever, 90 days or whatever your agreement says. So you can talk to your bank about extending that out. Related to receivables, I wanted to mention David, maybe this is a good time, is don't forget price increases. I'm just seeing it from a local restaurants here, in my community, we're ordering take-out. We're trying to help the community as much as we can when they're shutdown. But I'm certain everybody's jacked up their prices, 25, 50%25. They're charging take-out percentages on top of that. They're asking for big tips on top of that, and why not? They need the cash. Business is different now. We're in a crisis. Revisit your pricing, temporarily, and revisit your collection strategy, temporarily.

David: And again, that importance of communication with the customers. To actually have a conversation and to be candid, I assume, about your particular situation and the need for them to help you as best they can. That you understand their situation but you have a situation. You have employees and you have suppliers that you have to pay as well. Your customer, if you're important to them, again critical supply issues, if you're important you've got some leverage.

Scott:  Yeah. Sorry, David, to interrupt but to Steve's point earlier it works both ways. If you're a critical supplier, don't extend credit. Just get paid up front.

David: Yeah. Yeah. I think that's all very helpful advice. We're going to turn to the massive question of, and this is for Tom to start, what programs are the Canadian government, through BDC and EDC, implemented so far? We want to focus on the big ones right now. There are a few. There's wage support. There's direct lending and there's guarantees but, Tom, you can put a little bit of meat on the bone for that subject.

Tom:   Thanks, David. First, the business credit availability program, it's through BDC and EDC. They're working in conjunction with the financial institutions, the lenders. 65 billion dollar program but it's still being set up. There's still discussions over what exactly it's going to look like and how it's going to be accessed. Which I think goes to the point that Scott and Steve made, that plan around not having that operational immediately. From my discussions with people directly involved in these programs, and setting them up, right now were BDC is at is that the company can't have been in special loans, or be a non-performing loan, before COVID-19. They also want to know that the borrower has already attempted to get deferrals or liquidity assistance from their lender before coming to them. That is apparently going to be quite important. So they're not a first recourse.

David: Tom, if I can stop you there for a second, because that's an interesting point for people. If you're in an existing relationship, from what I've heard you say, if you're in an existing relationship with a major Canadian financial institution as the lender, or a smaller institution as a lender, or quasi-institutional lender, they want you to go back to your lender for everything, including starting the conversation with BDC and EDC. They don't want you to try and just go directly to BDC and EDC and get some kind of subordinated facility. They want your senior lender to manage the relationship first. Which makes that conversation that we talked about earlier incredibly important. Right? The second point, and I'll reiterate to folks, if you were in trouble before COVID-19, certainly BDC has telegraphed to the market place that they're not going to be interested in making loans to companies that they wouldn't have made loans to before COVID-19. That don't meet their credit criteria. Now there's probably some relaxation on that. The third thing is that if you were already in special loans that's an absolute block to you getting BDC and EDC support. Although I do understand that there are some conversations going on around relaxing that in the current environment. But we can't make any promises about that. That's nebulous right now. The other thing is that these programs are not yet rolled out. Maybe you can talk about that a little bit, Tom, too because where they are in the life cycle of this program, has any of this money hit the street yet from BDC or EDC?

Tom:   It has. There's three programs to more formal and more formulated. One is the Canada Emergency Business Account for small businesses, covering operating costs. Their 2019 payroll has to be in the range of 50 thousand to a million. So definitely small business and it's up to 40 thousand. The second program is a Small and Medium Enterprise Loan and Guarantee program. This is the one that is jointly being worked on by BDC and EDC working with the financial institutions. One of the points here is it's for credit up to 6 ¼ million but you only get that if both EDC and BDC are participating. Under the program BDC will provide 80%25 of the advance component of it and the financial institution, 20%25 and EDC will provide the guarantee component. In whatever proportion is divided up between BDC and EDC. There's a less formal program that is, frankly, word of mouth almost through BDC Capital. Where there is a lot more flexibility with respect to what the terms might be. It can be bridge loans. They can be convertible loans. But, again, the company must have been viable before COVID-19. It's a little bit more of a specialty product. It's certainly won't be rolled out on any kind of mass basis. But it is there. Then in the agricultural sector, Farm Credit Canada's providing an additional 5 billion in financing.

David: I can speak to that just a little bit. I know that we have farm credit matters inside the office that I've seen them as a lender. They're actively negotiating those kinds of advances now to support the farm community. There's a lot of effort going on to make this happen. People are going to have to hold their breath. It's probably going to be another week or so before we start to see transactions actually take their place. That's a guess on my part that it's a week away. They're working toward it. They're having the conversations. The major banks are having the conversations with BDC, EDC, FCC. I want to turn briefly to what the Provinces are doing and Tom, I'm going to pick on you again for second about what's going on in the oil and gas area with ATB.

Tom:   It's more than ATB. With ATB it's a relatively informal program about deferrals and it's a case by case thing. It's not unlike what we were talking about before with respect to other conventional lenders. There's things like corporate tax deferral. The government has funded what we call the orphan well fund levy for a 6 month period and that comes to a total of 113 million and they're just funding it. That's significant relief for the industry. They're funding up to a 100 million for abandonment and reclamation by the orphan well fund which provides an element of industry relief and there are various other programs. Some of which really haven't been rolled out yet. But with ATB, again, it matters if they were viable before. If they were in special loans before, it's going to be looked at with a lot more scrutiny. But it's not a show stopper.

David: Genevieve, I'll turn to you about Investment Quebec and the comment has been made to me about Investment Quebec is that they've been in the business of helping Quebec businesses survive. To keep employment in Quebec for a long time. The suggestion is that they're a little further ahead of the curve, in fact, in supporting businesses. Maybe you can shed some light on that.

Genevieve:      I think that's true. Investissement Quebec has supported business in order to maintain job in Quebec for many years now. So Investissement Quebec has come up with a program that they announced a few weeks ago which is called, in French, Programme d'action concertee temporaire pour le entreprises or Concerted Temporary Action Program for Businesses. Basically, businesses that are eligible are businesses that are self-... temporary liquidated crisis as a result of the COVID situation. Whether it is to supply or provide services to customers. This program, it's been announced that it will roll out in two forms, right now. In a form of a guarantee by Investissement Quebec of new loans or increased in facility that already existed as a result of the COVID situation. Or the second way they announced that it would unfold is by loan made by Investissement Quebec. Minimum financing is $50,000.00. The information is on their website. There's a number to call and businesses can reach out through their local network as well.

David: Thank you. That's very helpful and it's good to know that the government has stepped in in that way in the Province of Quebec.

Genevieve:      If I may add, sorry David, I forgot to mention that businesses, they've already announced that businesses that are actually under CCW protection, or BIA protection, will not be eligible for this program. I thought it should be noted.

David: No Investissement Quebec tip loans. Alright. Steve.

Genevieve:      Not under that program.

David: Yeah, not under that program anyway. Steve, I want to turn to you for a little bit of a crystal ball moment here. What do you think the long term implications of COVID-19 are? We've been beating it around on the prep call for this. What do we look like on the other side of this? Sort of looking forward and helping people plan for the next step in their business.

Steve: It's a great question and it really is a crystal ball. I'm going to talk about four points that, personally, I think is going to be impactful. Even as we ease the restrictions related to COVID-19 and social isolation, we do have a threat of a deep recession. We were teetering on the economic issues before this but even if you ignore the amount of wealth that's been lost in the public markets, families themselves are having to tap into lines of credit, they've lost a lot of income and they're just trying to get by. The real question is will individuals change their spending habits because either out of necessity or because they just look back and say, "I was spending too much to begin with." It is going to be a slow climb out of it from that piece. Second of all, there are certain sectors that are going to be irreparably harmed here. We, in the restructuring industry, especially in Ontario, have seen the decline of traditional retail bricks and mortar for a couple of years now. There's a lot of these stores that are closed right now that will not reopen. I think this is a real catalyst for significant change to a lot of these businesses. If you don't have an online presence, I think a lot of consumers right now are able to consume online, and it really is a catalyst to say, "I can do this. I don't need to go out anymore." Third, in terms of how do we do business, this really has been an unprecedented shift in how we work and learn. Really it's only been 3 weeks and it could go on for a long time. But it really is a forced, this webinar is a perfect example, it's a forced yes case for online learning and connectability. I think a lot of our jobs, or a lot of your employees jobs could have been done remotely before, but there is a certain stigma attached to that. To not going into the office. Not putting your time in. I think this is proving that maybe effectively it can be done from home. I think we will see a dynamic in change in businesses sites. I want everyone to think about the next time they think they'll shake a stranger's hand. I think that that is a real profound thing to sit here and go, "Will you? And therefore are you willing to get back on an airplane to travel again for a meeting where you could do it via video conference?" The roll out between the airline tourism and just how we conduct business generally. It will really, really change. Then finally a lot of talk in all the press about nationalism versus globalism. I really do think, especially in Ontario, we've seen it where I've been closest to, that there will be a fundamental government push to increase our manufacturing base, again. It's been a deep decline for a lot of years and this is a catalyst for change for that. Which, quite honestly, it's great for jobs. It's great for continued supply. It may hurt the price of goods but that will be the cost to pay. I do think there'll be a nationalism aspect to that but globalism, in terms of sharing of health care information. We've all realized that COVID-19 doesn't care about borders. So that more we can share internationally about best practices about treatments, above vaccines, will be global. I really do think that this will take the whole mantra think local and act global. It will change that, significantly. I think the phrase still applies but it will change that significantly.

David: I think, Steve, I share your view on all of those points. I think the panel shares your view on those points. I particularly take the point about the security of our supply chain and the manufacturing of product in North America, particularly to be something that, in the drive for the lowest cost product to get to the consumer in the big box store, has driven down costs to a level below what you would call an insurable value. Which is everything you buy has to have some circumstantial guarantee of trustworthiness associated with it. That's fine for toys for your kids but it's not fine for masks and ventilators and for all of the other things that are so incredibly important to the economy. Manufacturing, energy products, inputs into our natural gas and oil system, into power plants, into hospitals, into any infrastructure that is the baseline infrastructure for keeping the wheels greased in society. I think there's going to be a bit of retrenching, on that front, particularly in the manufacturing sector. Anybody else have a thought on that because I want to turn to Scott. We have a minutes left and then we want to get to Q&A. We're going to run a little bit over, folks, and I apologize. If you can't stay past the 1 hour mark, you can always pick it up and look at it in a couple of days on our website. Scott, just want to ask you for some parting practical tips for businesses. Coming from the perspective of not just a turnaround professional and a person who's acted as a chief restructuring officer in numerous businesses, but as an owner of a business with employees. What is it that you're doing now with the time that you have, beyond preparing for these presentations, what are you doing now in your business?

Scott:  Sure. I have three main takeaways from this whole thing, for my businesses, and for anybody that wants to ask me. One, we talked about already is don't run out of money part way through this. Do your planning now. Do everything we talked about on this webinar to ensure that you don't run out of money and, two, that you've built a war chest because you're going to need it. There's no scenario where you don't need a bunch of cash in the bank, to either pay back what you haven't paid already during the crisis, or go through a restructuring, or to invest into something positive to push your business forward. Number three, which I don't think we have talked about much yet because it's not really a liquidity thing but that speaks to your question is, don't lose momentum. Don't let the fires and the problems of this crisis take over your business or your life. How do you do that? How do you not lose momentum even if your business is entirely shutdown? And the answer is to double down on your work ethic and focus on the big picture things that you don't do day to day while you're running your business. If you're shutdown for 2 months, what can you do? Rethink, rewrite your strategic plan. Rethink, rewrite your business plan. Build your online, this is something that we're doing a lot of, that all the businesses, build your online direct to the consumer sales and marketing strategy so that your ready to roll out 2, 3 months from now. Clean up your CRM or build your CRM. Get on the phone and Zoom, some other platform, take a load. All of your customers, all of your suppliers, who are just as vulnerable as you are and build a relationship. Update your website. Focus on making it dynamic. Do a deep dive into your general ledger. Even if you were making it before I promise you you're wasting money somewhere. Do a deep dive and find out where that is and change your business practices when you come back up. Clean up all of that. This is my personal one, because I'm terrible at this, clean up all that administrative stuff that you haven't done for 6 months or a year, that you know for a fact is going to come back and bite you in the rear if you don't have it done, this is your time to do it. This is not your time to freeze. I promise you all of your competitors are frozen and you could move past them. You can use this crisis for that. David, do I still have one minute I can talk about stress?

David: You go right ahead. We've got some time.

Scott:  I just want to talk about stress and negativity really quickly. Everybody on this panel deals with insolvency and troubled companies and everyone on this panel immediately sees a management team that is beat up, unable to execute, unable to make decisions. It's a horrible sight. It's sad and it happens all the time. I just want to give you a trick that I use and I've been doing this for 30 years and every man on this panel has. Your entire career has been under this same level of stress and illiquidity. The first step to the trick that I use is you need to recognize that sitting around worrying about this for 12 hours or 16 hours a day and putting out fires, isn't effective. There's a limited amount of that time and then your brain is just in worry mode, it's not in business mode. What I do is I pick my time of day where I think I'm productive at dealing with the things that I don't want to deal with, that are negative fires, and I limit it to a maximum of 2 hours. And I work intensively. I'm going to sit down for 2 hours and I'm going to get through all of this stuff that I otherwise don't want to do and consumes my day. I do it intensely, and in this environment, include your consumption of media into that 2 hours window. Right? Don't be sitting listening to CNN for 12 hours a day and freaking yourself out. Put all in that, in that 2 hour window, and then for the rest of your day, if you work an 8 hour, you've got another 6 hours, another 8 hours, 12 hours or whatever your day is, focus on positive things. By positive I don't mean things that make you happy. I mean working towards your aim of your business.  I just gave you a laundry list of things that you can be doing during this, even if you're completely shutdown, to move your business forward and don't lose momentum. If you use that trick, it works for me, it works for businesses that I advise, you're more effective, you're refreshed, you're energized and you're positive and you're sane. That's how I do that.

David: It's interesting that you've given quite a laundry list of things that you can do. I always like to just tell my clients, "Stop and breathe. Whatever it is that allows you to breathe, take that moment and breathe. You're not worth anything to anybody dead. You're not worth anything to anybody if you're in a negative mode. You're at your best when you're your positive building best. That's what you need to be even in the face of this kind of a crisis. Great businesses have been saved by great leaders who step up in their businesses and take a positive can do approach to it. Yeah, there's all sorts of problems. But at the end of the day, that positivity really drives success.

We've had a number of questions. Many of them are very specific and I'm not going to be able to get to them but one that was just posed just moments ago, was there are a number of start-ups in our region, Waterloo, that were on a trajectory of growth but wouldn't necessarily be viable in a traditional banking sense. They were on Angel Friends and Family government funding. Do you have any insight about relief or assistance for those types of companies? If I could start with this question and make one observation. The government wage support is on the basis of a drop in revenue of 30%25. Right? What if you had no revenue and you were a start-up? 30%25 drop of nothing is nothing. You don't have a measure to even qualify. I don't think the government programs are aimed at start-ups that are not in a revenue mode. I turn to the panel and say, "What does a start-up do in this environment?" There's not a lot of money for them. There's no debt. There's no commercial credit available to them. There never was beforehand. What are they doing right now? Beyond going back to their Angel investors who all have margin calls on their equity portfolios.

Scott:     Who do you want to direct that to, David?

David:    Oh, you know, that's an open question. Put your hand up on that one.

Scott:  Maybe I'll start off and people can jump in. I'm Chairman and CEO of a start-up. Well, pre-revenue. Maybe that's a better word because there were several million dollars into it. Hemp processing plant in Colorado. I had a long talk with the primary shareholder, who is not me, on that file yesterday. He expressed exactly those concerns and isn't this all horrible. My real thinking was there's ample government programs at an individual level outside of the business to meet my priorities, as I outlined earlier, of making sure that my employees are safe and mental wellbeing and that they can pay their rent and eat their food. If you can't afford to do it yourself, and there's no business help there for you, you need to rely on the government programs that are there for the individuals. But from a business strategic perspective, all your competitors that you're doing this start-up and you're going to end up competing with somebody, well, they're all shutdown. Right? They are all shutdown right now. Think about the positive side of this. We can complete our plant because we do happen to have the financing. We can complete our plant. We can do our testing. We can do our lab testing. When this virus clears, when this crisis is over, we're good to go. Otherwise our competitors would have been out. It's a burgeoning industry and there's new customers all the time. This has been a interesting strategic benefit for us. I see it that way.

David: Okay. Anything to add to that, folks? Tom, I think you were proposing to raise your hand.

Tom:   Yeah, I think some of the discussion is to what extent you actually need to operate to survive this period. What do you absolutely need to pay to keep your business going and can you approach these stakeholders that you're going to owe money to for accommodation, not unlike the approach that you made to your lender. It's a similar discussion. People in that situation really have to give thought to what extent can they take this period to shutdown and do what Scott and Steve are talking about. Strategically positioning themselves to go forward and they should very much be approaching people like Scott and Steve to help with that planning.

David: Folks, we are 10 minute over our time. We have a few questions again. They're very specific and I'm not going to be able to answer them on this program but I might be able to reach out to the individuals through our system here and have a quick chat with them. So we'll close the presentation now. I want to thank Tom, Genevieve, Steve, Scott all for taking a considerable amount of time over the last few days to prepare for this presentation. There was a lot of information shoved into it very quickly. I want to thank the audience's patience with us in listening. We appreciate you listening. We wish you all the best on finding solutions to the issues that face you and if we can be of any assistance in that regard, our contact information is up on our respective websites and there will be links to all of that information on the Gowling website when this video is actually posted. We will also be posting a chart that summarizes the government programs on the Gowling website. That will become available in the near future and will be linked to this presentation as well. Again, thank you all very much and that brings the presentation to an end. Take care.

Tom:   Thank you.