New Caisse head faces baptism of fire as Quebec economy reels from shutdown

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Charles Émond was two weeks into his new job as chief executive officer of the giant Caisse de dépôt et placement du Québec when the stock market hit a record high in February. Two months later, the economic landscape is unrecognizable. So is Mr. Émond’s job.

The former Bank of Nova Scotia executive has faced a baptism of fire as the head of the $340-billion provincial pension-fund manager. Several of Quebec’s leading businesses, in which the Caisse holds large positions, are struggling to stay afloat during the economic shutdown. Mr. Émond has emerged for many as a linchpin in their struggle to survive.

Since the Caisse set up a $4-billion fund on March 30 to help Quebec businesses get through the COVID-19 crisis and its aftermath, interest in the lending program has been “enormous” and Mr. Émond does not rule out increasing the size of the pot if needed.

“We are preparing for a period that could last between 12 and 18 months,” Mr. Émond said in an interview, estimating the length of time it could take for many businesses that have seen cash dry up during the shutdown to generate sufficient cash flow to fund their operations.

Mr. Émond said the Caisse’s new fund is meant to complement aid programs set up by the federal and Quebec governments. Companies in distress also need to seek leniency from their banks before turning to the Caisse for funding. “We’re the third step” for companies in distress, Mr. Émond said, insisting that the Caisse expects to earn a return on its loans.

“If we help our businesses, but don’t generate a return for our depositors, we won’t create any value or be any farther ahead,” he said, insisting that the lending program falls within the Caisse’s dual mandate of developing Quebec’s economy while ensuring adequate returns for the Quebec Pension Plan and other public-sector pension funds whose money it manages.

Still, any returns on the new $4-billion lending program will likely be a long time coming. Several companies considered strategic to the Quebec economy are reeling right now, starting with Cirque du Soleil, in which the pension-fund manager holds a 20-per-cent stake. The Montreal-based entertainment colossus was forced to close all of its permanent and touring shows and lay off 95 per cent of its more than 4,700 employees. With a heavy debt load and no cash coming in, the Cirque could be forced to file for court protection from its creditors.

Mr. Émond acknowledged that the Caisse is “at the table” as the Cirque examines its options, and that the pension-fund manager could extend aid to the company, possibly in the form of a convertible loan. He also did not rule out the possibility of a debt restructuring at the Cirque.

“You can’t hide the fact that the entertainment sector has been particularly hard hit by this crisis,” Mr. Émond said. “But the Cirque was very profitable before the crisis and will be [profitable] after the crisis. It has one of the strongest entertainment brands in the world.”

Mr. Émond, 47, who joined the Caisse in early 2019 after spending almost two decades climbing the ranks at Scotiabank, said he remained “100-per-cent behind” the sale of Bombardier Inc.’s rail division (in which the Caisse holds a one-third stake) to France’s Alstom SA in a US$8.2-billion deal that would see the Caisse become Alstom’s largest shareholder. The logic behind the transaction has only been reinforced in recent weeks, he insisted, as many countries set their sights on infrastructure spending to lift their economies when the crisis is over.

Still, the deal, which had not been expected to close until early 2021, could be further delayed by the economic crisis. It is not clear that Bombardier, which has closed most of its manufacturing plants in recent weeks, can wait that long without a bailout from governments or the Caisse. Whatever transpires with Bombardier, Mr. Émond will likely be at the centre of it.

The Caisse’s real estate division Ivanhoé Cambridge – with its huge stable of office buildings and malls – is also reeling from the economic shutdown. Scores of retail tenants many never reopen their doors. And with more office staff working remotely – a phenomenon known in French as télétravail – demand for office space could be depressed for years to come.

Even so, Mr. Émond sees opportunities emerging from this crisis, which he says has accelerated trends that had already begun to take hold before the coronavirus pandemic struck. Quebec’s diversified economy and burgeoning technology sector should help it exit the crisis in better shape than countries or provinces that are dependent on just one or a few industries, he added.

“Quebec was in an excellent position before this crisis,” Mr. Émond said. “That hasn’t immunized it [against a downturn], but it helps.”

Still, the challenge Mr. Émond faces at the Caisse promises to be far greater that anyone could have imagined when Premier François Legault picked him to take over from Michael Sabia on Feb. 1. Despite the rotten timing of his appointment, he’s trying to stay optimistic.