BDC Makes Public its 2009 Annual Report
Montréal, Quebec, July 27, 2009 – The Business Development Bank of Canada (BDC) made public its annual report containing its financial statements for the year ended March 31, 2009. The results show record growth of $1.1 billion or 10% in the loan and investment portfolio to a total of $11.7 billion. These results enabled BDC to generate net income of $90.6 million. Net income included $88.7 million in net realized and unrealized gains on financial instruments, without which BDC would have basically broken even, reflecting the higher risk it has taken in accordance with its public policy mandate in the recession.
"We are pushing hard to support entrepreneurs who are faced with tight credit market conditions in a tough economy," said Jean-René Halde, BDC's President and Chief Executive Officer. "This year's growth in our portfolio is the direct result of our commitment to support our clients through these hard times. It also reflects new initiatives that we have taken on to assist the Government of Canada in easing access to credit for entrepreneurs and stimulating our economy."
For fiscal 2009, BDC's financial results will produce an annual dividend of $16.8 million to BDC's sole shareholder, the Government of Canada. Since 1997, BDC has paid a total of $156.7 million in dividends to its shareholder.
Highlights
BDC Financing clients accepted $2.8 billion in new loans through 7,749 transactions. Income totalled $193 million in fiscal 2009, compared to $160.9 million in fiscal 2008. The closing portfolio, before allowance for credit losses, rose to $11.1 billion from $10.0 billion, an increase of $1.1 billion, or 11% over 2008. This growth is attributable to BDC's response to mid-market businesses' needs and to new clients drawn to BDC because of tight credit conditions.
BDC Subordinate Financing clients accepted $92.6 million in new loans through 92 transactions. This was done by way of a limited partnership with the Caisse de dépôt et placement du Québec. BDC's portion of total acceptances accounted for $46.3 million in fiscal 2009. Income totalled $6.8 million in fiscal 2009, $4.2 million lower than reported in fiscal 2008 but still a very good result considering the difficult economic conditions. As of March 31, 2009, BDC's Subordinate Financing portfolio stands at a fair value of $155.1 million, consistent with last year's level of $156.2 million.
BDC Venture Capital authorized 54 direct investments totalling $64.1 million. It also authorized a $75 million investment in Tandem Expansion Fund, a new private sector growth capital fund. Market conditions, combined with the highly risky and illiquid nature of venture capital investments, have resulted in a pronounced volatility of earnings. In fiscal 2009, BDC Venture Capital recorded a loss of $106.3 million. Most of this loss was due to the change in the fair value of investments. Despite difficult market conditions, BDC realized an important gain of $36.3 million from the sale of one investment, generating a 5.3:1 return of capital and achieving an internal rate of return of 73% on this investment.
BDC Consulting revenues increased 10.6% over last year and reached a record high of $27.4 million. This year, 2,720 mandates were started, in line with last year's result of 2,770 mandates. As a result of higher revenues, BDC Consulting's loss was reduced by 35% to $2.9 million for fiscal 2009 from $4.5 million the year before. As a result of BDC's strategy to offer entrepreneurs across Canada quality services at a price they can afford, consulting revenues do not fully offset the operating and administrative expenses. BDC Consulting offers entrepreneurs customized, affordable, high-quality services to help them become more competitive in local and global markets.
Serving entrepreneurs in a time of need
In the latter part of 2007, the implosion of the U.S. sub-prime mortgage market triggered a global liquidity crisis. Since then, turmoil in financial markets led to the deepest, broadest and most pervasive financial crisis in decades. Liquidity contracted sharply as risk aversion became widespread and sources of credit exited the market. BDC reacted quickly by extending repayment terms to entrepreneurs who were suffering cash flow problems.
In late 2008 and early 2009, the federal government announced measures to increase BDC's capacity to help viable Canadian businesses:
- The creation of the Business Credit Availability Program (BCAP), a collective effort through which BDC, private sector banks and EDC collaborate to provide up to $5 billion in loans and other forms of credit support and enhancement to businesses; and
- the creation of a Canadian Secured Credit Facility (CSCF)—to be established and managed by BDC—with up to $12 billion to support the financing of vehicles and equipment for businesses and consumers via the purchase of term asset-backed securities (ABS) backed by loans and leases on vehicles and equipment.
Leading as a development Bank
BDC tailors its financing, consulting and venture capital services so that entrepreneurs can choose precisely what they need, when they need it. This means, for example, helping them secure working capital, expand facilities, pursue global opportunities or champion a new technology in a difficult venture capital market.
- BDC accepts more risk than private-sector lenders and offers more flexibility on repayment terms. BDC's willingness to finance riskier projects and businesses is evident in its allowance for credit losses ratio, which is significantly higher than that of typical private sector banks.
- BDC Venture Capital is a Canadian leader in the critically important early-stage (including seed) investment phase. In fiscal 2009, BDC made 58% of the dollar value of its direct investments in early-stage firms. The industry average is 44%.
- BDC offers subordinate financing, a hybrid financing that combines debt and equity features, to entrepreneurs who need working capital to grow their businesses but do not have the tangible securities that conventional lenders require, or who do not want to dilute their ownership of the firm. BDC anchors this service in a partnership with the Caisse de dépôt et placement du Québec. This year, BDC Subordinate Financing received $92.6 million acceptances, including the Caisse's portion.
- BDC makes a difference to its clients by providing them with customized financing and consulting services. Statistics Canada, in a study that compared BDC clients with non-BDC clients, found that BDC clients outperform non-BDC clients in terms of revenue and employment growth.
- To reach entrepreneurs in a diverse society like Canada, BDC maintains formal partnerships with more than 220 Community Futures Development Corporations, a cross-country network of contact points located mostly in rural areas. Using this network, BDC supported more than 1,000 entrepreneurs in fiscal 2009.
- At 22 Entrepreneurship Centres across Canada, BDC offers specialized lending, consulting and resources dedicated to meeting the needs of younger, smaller businesses. In fiscal 2009, the Centres granted $190 million worth of loans.
- Many young entrepreneurs find it hard to secure financing because they have limited net worth, little or no managerial experience, and have no proven track record. Over the past five years, BDC authorized over $780 million in financing to young entrepreneurs across the country.
- BDC helps promote economic development in Aboriginal communities through a grassroots approach called the Circle of Entrepreneurial Success. This strategy delivers management training, ongoing mentorship and loans of $5,000 to $20,000, with terms that vary depending on the cash flow expectations for the project.
About BDC
BDC is Canada's business development bank. From more than 100 offices across the country, BDC promotes entrepreneurship by providing highly tailored financing, venture capital and consulting services to entrepreneurs.
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Information:
Johanne Bissonnette
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