Sunwing is the third company to be approved for a loan under the government LEEFF program. (Randy Risling / Toronto Star via Getty Images)

Sunwing turned to one of the federal government’s pandemic programs, an emergency loan of $ 375 million, days after flights to the Caribbean and Mexico were suspended until April 30.

The government said Monday that Sunwing Vacations and Sunwing Airlines will now have access to $ 375 million in cash. The loan is being provided through the government’s Large Employers Emergency Funding Mechanism (LEEFF), a program to provide bridging financing to large businesses that have been affected by the coronavirus pandemic.

Under the loan, Sunwing agreed to maintain an account with money it received from customers for trips that were canceled due to the pandemic. The federal government has stressed that it will provide financial assistance to the struggling aviation industry only if airlines reimburse passengers whose flights have been canceled due to COVID-19.

“This account will be maintained until the conclusion of broader government discussions with the airline industry and until a policy is established for the treatment of these prepaid amounts,” said a statement from the Canadian Company. emergency funding for the company, which manages the LEEFF program.

LEEFF, who was introduced for the first time last May, is offering loans of $ 60 million or more to large companies facing cash flow issues as a result of the pandemic. But the program has proven to be unpopular among large corporations, as it carries an interest rate higher than typical private sector lending rates.

The bulk of the loan – 80 percent – will be an unsecured facility and the remaining 20 percent will be secured. The unsecured loan will be for a period of five years, with an interest rate of 5% which will increase to 8% after one year, and to 2% in subsequent years. The secured loan will be the same as the borrower’s existing secured debt.

The loan also comes with several restrictions, including a ban on payment of dividends to shareholders and share buybacks, as well as certain executive compensation options. Other government programs, including the popular Canada Emergency Wage Subsidy (CUSS), do not include such restrictions.

Sunwing Airlines, Sunwing Vacations and Sunwing Travel Group are all listed as having received the SSUC. It is not known exactly how much segments of the business have already received through this program.

Sunwing is only the third company to turn to LEEFF during the pandemic. Gateway Casinos and Entertainment Ltd. was approved for a $ 200 million loan, and Conuma Resources Ltd. was approved for $ 120 million. Sunwing, which employs around 3,000 people, has so far withdrawn $ 50 million of the $ 375 million for which it has been approved.

Sunwing Travel Group and its two subsidiaries

Sunwing was one of four airlines that agreed to suspend all air service to Mexico and the Caribbean from last week until April 30. The move was part of the latest round of federal travel restrictions, announced Friday, aimed at stemming the spread of new variants. of COVID-19. International travelers will also need to quarantine themselves for up to three days at approved hotels while awaiting their test results upon arrival.

The Canadian airline industry has called on the federal government to provide a financial aid plan for the battered sector since the pandemic struck in March.

Alicja Siekierska is a Senior Journalist at Yahoo Finance Canada. Follow her on twitter @alicjawithaj.

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