(TORONTO) – May 8, 2009 - Export Development Canada (EDC) today announced that, following the implementation of its domestic powers, it expects to facilitate up to CAD 1 billion in new domestic contract guarantees in 2009.
“Last year, EDC facilitated more than CAD 4.2 billion in contract guarantee business in partnership with banks, so our approach to the domestic market is easily transferable and allows us to bring this capacity to Canadian companies immediately,” said Pierre Gignac, Senior Vice-President, Insurance, EDC.
“Through EDC’s guarantees, Canada’s financial institutions will see their risk reduced and require less capital, allowing them to take on more transactions for their customers.”
In the normal course of business, Canadian companies are frequently required by their clients to provide letters of guarantee from their bank to secure their contractual obligations. Financial institutions normally require collateral in support of these letters, which uses up a company’s credit limit. This process can have a significant impact on the ability for a company to obtain other types of support from its financial institution, especially in times of tight credit conditions.
Through its contract guarantee products, EDC will enable a financial institution to forgo the collateral usually required from a Canadian company to post a performance or payment guarantee by offering 100 per cent protection for the financial institution’s exposure.
EDC’s contract guarantees free up a company’s credit capacity and allow them to apply their credit needs towards other revenue generating activities.
In addition, EDC has guarantee products for financing, which it provides to banks for loans to customers. These products are different than EDC’s contract guarantee product.
The manner that EDC will bring additional capacity to the domestic market reflects what the Government has asked it to do, discussion with and feedback from Canadian financial institutions.
This additional capacity is made possible after changes to EDC’s legislation as a result of the Government’s Budget 2009, in which EDC received a temporary two-year broadening of its mandate to undertake domestic financing and insurance. EDC’s domestic powers went into law on Thursday, March 12, 2009.
EDC has also been working with Canada’s private commercial insurance providers to develop more ways to work together to increase access to credit for Canadian companies.
EDC is Canada’s export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC’s knowledge and partnerships are used by more than 8,300 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining, a recognized leader in financial reporting and economic analysis, and has been recognized as one of Canada’s Top 100 Employers for eight consecutive years.
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Media contact:
Phil Taylor
Export Development Canada
Tel: (613) 598-2904
Blackberry: ptaylor@edc.ca
