March 9, 2009

Canadian Secured Credit Facility

Construction industry takes cautious approach to secured credit facility

VINCE VERSACE

staff writer

It is too early to say how the yet-to-be implemented Canadian Secured Credit Facility (CSCF) will help the construction industry, according to the Canadian Construction Association.

“We have not heard about a lending or bonding crunch for our members. It is the tax treatment of the equipment we are concerned about,” said Michael Atkinson, president of the Canadian Construction Association (CCA).

“This is not really what we are looking for, but it might be too soon to have an idea of its effect.”

The CSCF was announced in Canada’s Economic Action Plan, with an allocation of up to $12 billion to purchase asset-backed securities (ABS) backed by loans and leases on vehicles and equipment. The federal government recently announced the launching of CSCF consultations.

“We are taking action to improve financing options for consumers and businesses for vehicles and equipment,” said federal finance minister Jim Flaherty in a statement.

“We want to hear from interested Canadians on the optimal means to structure this facility and put funding in the hands of those who need it.”

The aim of the CSCF is to ensure continued access to financing for the purchase and leasing of automobiles, capital equipment, medical equipment and other similar assets. It’s part of the federal government’s Extraordinary Financing Framework, which supports up to $200 billion in financing for Canadian businesses and consumers.

The CCA has pushed for an accelerated capital cost allowance provision for emission upgrades and it said it is not clear if the CSCF is meant to replace that.

The accelerated capital cost allowance would result in better productivity and address environmental concerns, allowing for the quicker renewal of construction vehicle and equipment fleets with newer, clean-fuel burning versions.

Ottawa is seeking comments about the CSCF that address:

• What structure would best facilitate the restarting of the term ABS market in Canada;

• How purchases should be priced;

• How funds should be allocated among eligible participants and different categories of ABS.

The Department of Finance and the Business Development Bank of Canada (BDC) will jointly proceed with a CSCF consultation process with potential participants and interested stakeholders.

The facility will be managed by BDC and administered within guidelines jointly developed by the Department of Finance and BDC following the consultation process. Anyone interested in participating in the consultation can refer to the Consultation on the Canadian Secured Credit Facility document at www.bdc.ca and forward their comments to cscf@bdc.ca.

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