COVID-19 or coronavirus: everybody thinks about it, reads about it and talks about it, and, yet, we still ignore the full impact it will have on the world. So far, the outbreak of the virus disrupted supply chains, closed stores and resulted in quarantines across the globe. On March 11, 2020, the World Health Organization declared the coronavirus a pandemic and, for many public companies with a December 31 year-end, this announcement came only a few days before regularly scheduled dates for filing annual reports.
Usually, annual reports allow management to explain how a company performed during a particular period and what its prospects are. As part of this disclosure, management has to address trends and risks that could reasonably affect their financial statements, operations and business in general. The coronavirus is a novel virus, and a novel risk, resulting in logistical, health and financial issues never seen before.
The challenge is thus to provide investors with accurate information about the future while information about the virus is changing on a daily basis. And the cost of not getting the disclosure right is high. Issuers could face regulatory action or litigation if they were not sufficiently forthcoming about the impact of the virus on their operations, their financial ties to infected regions such as China or Italy, or if they characterize the virus as a hypothetical risk, while, in reality, the virus has affected the issuer’s operations.
In the last weeks, the U.S. Securities and Exchange Commission has issued guidance relating to the disclosure public issuers ought to make in connection with the coronavirus. Reporting issuers are told, among other things, to disclose specific facts about the past and potential future impact of the virus and to avoid broad drafting of risks related to the virus.
While the Canadian Securities Administrators has not issued any guidance regarding coronavirus disclosure, numerous Canadian issuers have already incorporated such disclosure in their filings. In fact, since January 1, 2020, there have been more than 250 filings of Management’s Discussion & Analysis and Annual Information Forms that mention the words “coronavirus” or “COVID-19”. As such, the purpose of this article is to discuss the steps certain public issuers have already taken, examples of which are provided later in this document, and to discuss certain issues that virtually all public companies should be considering.
Before coronavirus was declared a pandemic and before Canada announced its border closures, almost no issuer had ever faced a phenomenon of this magnitude. Consequently, most public documents contained general disclosure related to disease outbreaks and pandemics such as negative global financial consequences, economic uncertainty; negative impacts on production or operations in countries and regions most affected by the virus; impact on the demand of products and services; and the triggering of force majeure clauses by third-party suppliers or service providers. The broad drafting approach comes as no surprise, for, until 2020, no issuer would have been able to identify precisely how a pandemic could affect its business, operations or financial condition.
Our review of public disclosure documents filed on SEDAR indicates that a majority of issuers continue to favour a broad and all-inclusive approach to drafting risks related to disease outbreaks and pandemics, while inserting, where applicable, references to COVID-19.
That being said, now that the virus was declared a pandemic and drastic measures are imposed by the federal and provincial governments, it seems prudent and reasonable for issuers to thoroughly assess their local and international operations and favour disclosure of specific facts about the past and the likely future effect of the virus instead of adopting general and broad language that presents the risk in the hypothetical.
Besides, considering how intertwined risk factors are, issuers should not limit themselves to pandemic disclosure only but should evaluate the impact of COVID-19 on their business in general. The disruption of a supply chain, for instance, impacts the end consumer and the issuer’s ability to fulfil its orders. A global economic slowdown and high market volatility could make it more difficult to obtain financing. Unstable trading conditions and shortages of cash flows could increase the risk that an issuer breaches its financial covenants. Below are examples of risk factors that could be related or caused by COVID-19:
Supply chain disruption. As a result of factory shutdowns in China (the world’s largest exporter and, at the same time, the country where the virus originated), the supply chains of numerous public issuers have and will continue to be disrupted. In a recent report, McKinsey & Company estimated that the supply chain disruptions will likely result in a decrease in the global GDP from 2.5% to 2%. Even issuers that do not own or operate any foreign manufacturing facilities should consider the risk of supply chain disruption, for it is likely that a high percentage of their manufacturing purchases are from China. Ultimately, interruption of its supply chain or the supply chain of a supplier could result in an inability to fulfill customers’ orders. For instance, Volkswagen, the world’s largest carmaker, shut production lines because of disruptions to supply chains as a growing number of European countries close borders. 
Interruption of operations. Social distancing (avoiding public places that pose a higher risk of contamination) is one of the measures being adopted around the world. As a result, issuers that own or operate restaurants, bars, and stores are likely to attract fewer visitors or even close their doors temporarily. For instance, on March 18, 2020, the Financial Times reported that Zara, the world’s biggest fashion retailer, will temporarily close its 3,785 stores and write off nearly £300 million of inventory as sales dropped 24% because of coronavirus. In Canada, Hudson’s Bay announced that it will close all its stores from March 18 to April 1. Businesses like the Bay and Zara and others generally need employees to perform their jobs on site and, as such, may see more illness among their staff members.
Effect on consumer demand. Leisure travel has been another industry seriously affected by the virus. This week, British Airways, KLM, Delta Airlines, Air Canada and Air Transat, to name just a few, indicated that they will have to cut jobs, suspend routes and ground aircraft because of the coronavirus pandemic. Issuers owning or operating other leisure-related businesses such as casinos, theatres and cinemas are likely to experience a decrease in visitors, while business carrying-on travel agency activities are likely to be impacted by the reduction in airline traffic. Concurrently, due to declining attendance/demand and certain government-directed shutdowns of public places, workers in the airline, entertainment and hospitality industry could lose working hours and struggle financially, which, in turn, could increase consumer credit borrowing to service their mortgages, student loans and credit card payments.
Work-related measures. Even if certain issuers will not be affected directly by COVID-19, almost all of them had, at one point during March 2020, to adopt or accommodate a work-from-home policy. Such precautions as working from home, suspending all nonessential travel or postponing sponsored events or meetings could harm the business. So far, the automobile industry was one of the most impacted by the recent confinement measures announced by governments around the world. For instance, France’s PSA, owner of Peugeot, Citroën, Vauxhall and Opel brands, closed all its European plants. Volkswagen, the world’s largest carmaker, shut down production lines because as a growing number of European countries close borders. In North America, more than 100 car and engine plants in ceased production after General Motors, Ford and Fiat Chrysler Automobiles agreed co-ordinated wind downs and Honda and Toyota announced blanket closures.
Market volatility, credit risk and financial performance. On Wednesday, March 18, 2020, the S&P 500 index closed down 25 per cent off its value a month ago. The Dow Jones Industrial Average was off more than 28 per cent off its value a month ago. The U.S. dollar rallied and the U.K. pound hit a low not seen since the 1980s. As such, issuers operating in the financial industry have experienced and will likely continue experiencing high volatility. Facing a decrease of revenues, certain issuers may require additional financing that might not be available and, subsequently, may not meet the financial covenants in their credit agreements.
Issuers who have provided earnings guidance or other material financial outlook or future-oriented financial information (FOFI) will also need to consider their disclosure requirements in that regard, including the requirement to discuss in their next MD&A events and circumstances that occurred that are reasonably likely to cause financial results to differ materially from such guidance, outlook or FOFI and state the expected differences. When updating or providing new guidance, outlook or FOFI, issuers must use assumptions that are reasonable in the circumstances, which might prove to be difficult in such a fluid situation. If an issuer instead decides to withdraw previously disclosed guidance, outlook or FOFI, it will be required to disclose the decision in its MD&A and discuss the events and circumstances that led to that decision, including a discussion of the underlying assumptions that are no longer valid.
Issuers will also need to consider whether the impacts of the COVID-19 outbreak on their business, operations or capital result in a material change that triggers the requirement to immediately issue and file a news release disclosing the nature and substance of the change, followed by the filing of a material change report in prescribed form no later than 10 days following the change. A “material change” is defined under applicable securities legislation as a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer, or a decision to implement such a change made by the directors or by senior management of the issuer who believe that confirmation of the decision by the directors is probable.
On March 18, 2020, the Canadian Securities Administrators issued a press release indicating that it will provide a 45-day extension for periodic filings normally required to be made by issuers on or before June 1, 2020, including financial statements, MD&A and annual information forms. This does not alter, however, the reporting issuers’ timely disclosure obligations in the event of a material change in their business, operations or capital.
In conclusion, in times of a pandemic, public health and safety should be the utmost priority; however, investor protection also needs to be considered. As such, issuers filing public disclosure documents will have to carefully assess their operations and determine, to the extent possible, the impact of COVID-19 both within the context of the industry they operate in, as well as within the context of their particular businesses. But, considering the speed at which the virus spreads and events unfold, this might be easier said than done.
Risk Factors Overview
|1. Issuers in the financial industry
|“Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak are unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Corporation and its operating subsidiaries in future periods.”
|“A local, regional, national, or international outbreak of a contagious disease, including the COVID19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, BSE, avian influenza, pandemics or other material outbreaks of disease, could decrease the willingness of the general population to dine out, cause staff shortages, reduced customer traffic, supply shortages, and increased government regulation, all of which may negatively impact the business, financial condition and results of operations of the Corporation and the Fund.”
The ratification of the Phase 1 trade deal between Washington and Beijing was met with relief. But just as the threat of a trade war was subsiding and the global manufacturing sector was stabilizing, the prospects for business profitability were muddied by a new danger, this time in the form of a frightening disease. Estimates of the economic impacts of coronavirus (COVID-19) will remain speculative until we have a better idea of the epidemic curve and the vaccine developed, or both. The Chinese government has already ordered the largest quarantine operation in human history (affecting 60 million people) to slow down propagation of the virus. Beijing has also ordered an extension of the Lunar New Year holiday and school closures. These restrictions will put a serious strain on the global supply chain. The consequences for the global economy of a prolonged shutdown of China’s economy would be much greater today than during the SARS epidemic of 2003. In 2002, China had only just joined the World Trade Organization, and its economy represented 8% of global GDP. Today, it accounts for 20%. In 2002, the United States was the main trading partner of most countries around the world. Today, China is. Given these circumstances, we have reduced our global GDP forecast for 2020 by only one-tenth to 3.1%(1), but additional reductions could be justified if virus-related production stoppages prove to be long-lasting. Barring any new fiscal stimulus, the U.S. economy will likely slow again in 2020 to 1.9%(1), a growth rate closer to its potential. Supported by healthy household balance sheets and a vibrant labour market, consumer spending will remain the driving force of the economy. The housing sector is expected to continue benefitting from the interest rate cuts made in 2019, as evidenced by the strong rebound in recent months. Given these factors, we do not believe that further rate cuts will be required in 2020. The Chair of the U.S. Federal Reserve, Jerome Powell, has already set a high bar for further interest rate cuts, stating that only a significant revision to the U.S. Federal Reserve’s outlook could warrant a further policy easing.”
“Global Economic Conditions; Market Dislocation; Business Cycles
General global economic conditions, including, without limitation, interest rates, general levels of economic activity, fluctuations in the market prices of securities, participation by other investors in the financial markets, economic uncertainty, national and international political circumstances, natural disasters, public health crises (such as the recent global outbreak of a novel coronavirus, COVID-19) and other events outside of our control, may affect the activities of the Corporation, our Funds and the businesses in which our Funds invest […] Challenging market and economic conditions, including those caused by changes in tax laws and other regulatory restrictions, may make it difficult for our Funds to find suitable investments or to secure financing for investments on attractive terms. Such conditions may also result in reduced opportunities for our Funds to exit and realize value from their investments. In addition, in the event that sources of finance are not readily available or become too costly, it may be difficult for potential purchasers to secure capital to purchase our Funds’ investments.
Natural Disasters, Terrorist Acts and Other Disruptions and Dislocations
[…] Terrorist attacks, public health crises including epidemics, pandemics or outbreaks of new infectious disease or viruses (including, most recently, the novel coronavirus (COVID-19), and related events can result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to the Corproation, our Funds and our PE or Debt Investments.”
“While crude oil prices have rebounded from December 2018 lows, ongoing price stability remains a concern despite supply restrictions and unease arising from geopolitical tensions, as well as depressed demand from China following the spread of COVID-19. Factors supporting oil prices include the extension of existing output cuts to the end of the first calendar quarter of 2020 by the Organization of the Petroleum Exporting Countries (OPEC), significant volume reductions resulting from U.S. sanctions on Venezuela and Iran, and decelerating drilling activity in the U.S. The downside risks to crude prices are associated with the negative impact on demand from expectations of slower global growth in 2020, and the risks of further deceleration should the spread of COVID-19 disrupt activity in other countries beyond that seen in China. While steps taken to limit production supported an earlier narrowing of the spread between WCS — Canada’s heavy oil benchmark — and WTI, these differentials could remain volatile until pipeline capacity constraints have been resolved. Natural gas prices also continue to be an area of concern, as Alberta Energy Company (AECO) prices — the Canadian gas benchmark — have experienced volatility since mid-2017, mainly due to severe pipeline constraints, with the largest impact felt by Canadian dry gas producers. The Corporation’s overall commodity exposure continues to perform within our risk appetite, with losses in our oil and gas portfolio down from peak levels. Clients in our oil and gas portfolio are currently being assessed on the basis of our enhanced risk metrics, and our portfolio is being monitored in a prudent manner.
With our increasingly global world, the outbreak of certain illnesses has the potential to reach pandemic levels. In addition to the humanitarian impact, these phenomena, such as the recent COVID-19 outbreak, introduce uncertainty and pose risks to the global economy, as well as to our clients and our operations. The Corporation monitors these events and has measured.”
|2. Issuers in the medical and pharmaceutical industry
|“A pandemic or other global or North American-wide illness could cause interruptions to the Corporation’s operations. Depending on its severity and reach, such an event could affect Corporation’s workforce resulting in the inability to continue to operate our manufacturing facilities. Further, the Corporation’s operations would be affected if our supply partners, customers and/or transportation carriers were impacted by a pandemic. In particular, as of the date of this AIF, the full extent of the effects of the COVID-19 virus (also known as the coronavirus) is unknown. The Corporation does not operate businesses in the areas which are currently the most affected by this virus and therefore it has not as yet affected Corporation’s own operations. It’s difficult to predict how this virus may affect Corporation’s business in the future, including the effect it may have (positive or negative; long or short term) on the price of caustic soda, which is affected by the North East Asia Spot Index. It is possible the COVID-19 virus could have a material adverse effect on our business, financial condition and/or results of the operation.”
“Disruption of Supply Chain
Conditions or events including, but not limited to, those listed below could disrupt the Company’s supply chains, interrupt operations at its facilities, increase operating expenses, resulting in loss of sales, delayed performance of contractual obligations or require additional expenditures to be incurred: (i) extraordinary weather conditions or natural disasters such as hurricanes, tornadoes, floods, fires, extreme heat, earthquakes, etc.; (ii) a local, regional, national or international outbreak of a contagious disease, including the COVID-19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, or any other similar illness could result in a general or acute decline in economic activity (see also, “Public Health Crises, including COVID-19”); (iii) political instability, social and labour unrest, war or terrorism; or (iv) interruptions in the availability of basic commercial and social services and infrastructure including power and water shortages, and shipping and freight forwarding services including via air, sea, rail and road.
Public Health Crises, including COVID-19
A local, regional, national or international outbreak of a contagious disease, such as COVID-19, could have an adverse effect on local economies and potentially the global economy, which may adversely impact the price and demand for the Company’s products. COVID-19 could affect the Company’s ability conduct operation and may result in temporary shortages of staff, to the extent its workforce is impacted. Such an outbreak, if uncontrolled, could have a material adverse effect on our business, financial condition, results of operations and cash flows, including a potential reduction in patient visits at the Company’s Clinics and, as a result, potential lost revenue.”
|“Our business is subject to risks arising from epidemic diseases, such as the recent outbreak of the COVID-19 illness. The recent outbreak in China of the Coronavirus Disease 2019, or COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the impact that COVID-19 could have on our business, the continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain and the manufacture or shipment of both drug substance and finished drug product for our product candidates for preclinical testing and clinical trials and adversely impact our business, financial condition or results of operations. The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition. The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.”
“The Company is dependent upon key personnel; Director residence requirements
[…]The Company employs a small number of employees who have many years of technical knowledge of the Company’s technology and two senior officers, the CEO and CFO. The Novel Coronavirus (“COVID-19”) imposes a high risk to all the Companies activities. The Company has established a policy to diligently monitor developments. Because the situation is fluid, the Company will be updating its staff whenever necessary. The Company has implemented and communicated a policy to all staff in order mitigate any potential risk.
The World Health Organization has declared COVID-19 a pandemic. The Company is actively assessing and responding where possible to the potential impact of the COVID-19 pandemic. The risk to the Company, the health of its employees and to those third-party vendors that support the Company and its operations is high. Any impact on the Company arising from the pandemic could have a material adverse effect on the Company’s business, results of operations and financial condition.”
|“[…] difficulty in patient monitoring and data collection due to failure of patients to maintain contact after treatment; a regional disturbance where the Company or its collaborative partners are enrolling patients in the Company’s clinical trials, such as a pandemic, terrorist activities or war, or a natural disaster; or varying interpretations of data by the FDA and similar foreign regulatory agencies. For example, in December 2019, a novel strain of coronavirus, also known as COVID-19, was reported to have surfaced in Wuhan, China and has evolved into a global pandemic since then. Our business could be adversely impacted by the effects of COVID-19 or other epidemics. Some of our contract manufacturers of clinical trial materials are located outside Canada, and should they experience disruptions, such as temporary closures or suspension of services, our clinical trials could be delayed. It is likely that a health facility or physician would not prioritize a clinical trial over an emergency care, and some health facilities where the Company conducts clinical trials may direct all medical specialists to first line care in the event of an epidemic or pandemic such as COVID-19, which could delay such clinicals trials or result in their suspension or termination. In addition, health facilities affected by COVID-19 may decline to accept on their premises patients suffering from an impaired immune system, such as cancer patients, thereby delaying clinical trials relating to such patients, or resulting in the suspension or termination of such clinical trials.”
|3. Issuers in the oil industry
|“Through the first few months of 2020, oil prices deteriorated due to softening global demand caused by the COVID-19 (Coronavirus) impact. This situation was exacerbated in early March with no agreement to cut oil supply from OPEC+ and an announcement from Saudi Arabia that they intend to relax all quotas effective immediately. With the spread of COVID-19 and additional oil supply expected to come on-stream over the near term, oil prices and global equity markets have deteriorated significantly and are expected to remain under pressure. The extreme supply/demand imbalance is anticipated to cause a reduction in industry spending in 2020.”
|4. Issuer in the mining industry
“The Corporation faces risks related to health epidemics and other outbreaks of communicable diseases, which could significantly disrupt its operations and may materially and adversely affect its business and financial conditions.
The Corporation’s business could be adversely impacted by the effects of the coronavirus or other epidemics. In December 2019, a novel strain of the coronavirus emerged in China and the virus has now spread to several other countries, including Canada and the U.S., and infections have been reported globally. The extent to which the coronavirus impacts the Corporation’s business, including its operations and the market for its securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the outbreak and the actions taken to contain or treat the coronavirus outbreak. In particular, the continued spread of the coronavirus globally could materially and adversely impact the Corporation’s business including without limitation, employee health, workforce productivity, increased insurance premiums, limitations on travel, the availability of industry experts and personnel, restrictions to its drill program and/or the timing to process drill and other metallurgical testing, and other factors that will depend on future developments beyond the Corporation’s control, which may have a material and adverse effect on its business, financial condition and results of operations.
There can be no assurance that the Corporation’s personnel will not be impacted by these pandemic diseases and ultimately see its workforce productivity reduced or incur increased medical costs/insurance premiums as a result of these health risks.
In addition, a significant outbreak of coronavirus could result in a widespread global health crisis that could adversely affect global economies and financial markets resulting in an economic downturn that could have an adverse effect on the demand for precious metals and our future prospects.”
|“The recent outbreak of the novel coronavirus (COVID-19) has had a negative impact on global financial conditions. The Chinese market is a significant source of global demand for commodities including gold. A sustained slowdown in China’s growth or demand, or a significant slowdown in other markets, in either case, that is not offset by reduced supply or increased demand from other regions, could have an adverse effect on the price and/or demand for gold. In the event that the prevalence of the coronavirus continues to increase (or fears in respect of the coronavirus continue to increase), governments may increase regulations and restrictions regarding the flow of labour or products, and the Company’s operations, suppliers, customers and distribution channels could be severely impacted.”
“Outbreak, or Threatened Outbreak, of Any Severe Communicable Disease in West Africa
[…]In particular, malaria, Coronavirus (“COVID-19”) and other diseases such as HIV/AIDS represent a serious threat to maintaining a skilled workforce in the mining industry throughout Africa and are a major healthcare challenge faced by the operationsof the Company. There can be no assurance that the Corporation will not lose members of its workforce or see its workforce man-hours reduced or incur increased medical costs as a result of these health risks, which could materially and adversely affect the business and results of operations of the Company.
Coronavirs and health crises
The current outbreak of novel COVID-19 and any future emergence and spread of similar pathogens could have an adverse impact on global economic conditions which may adversely impact the Company’s operations, and the operations of its suppliers, contractors and service providers and the ability to obtain financing. Travel bans may also adversely impact the Company’s operations and the ability of the Company to advance its projects. In particular, should any employees or consultants of the Company become infected with Coronavirus or similar pathogens, it could have a material negative impact on the Company’s operations and prospects.”
|5. Issuers in the leisure and entertainment industry
|“Strong demand for air travel in the loyalty programs operated by the Corporation’s investee companies creates a significant dependency on the airline industry in general. Any disruptions or other material adverse changes in the airline industry, whether domestic or international, affecting any airline related to any of the loyalty programs which the Corporation invests in could have a material adverse impact on its business. […] In late December 2019, the current coronavirus (COVID-19) was identified as having originated in the Wuhan Province of China, with cases subsequently confirmed elsewhere in China and in other countries. The risks to the Corporation of epidemics and other public health crises, such as the ongoing coronavirus, include risks to employee health and safety, and our business and investments, particularly our investments in [loyalty programs], could also be adversely impacted by the ongoing coronavirus (or by other future epidemics or global health crises) in the short term given those investments’ exposure to the airline and travel sectors. Consequently, members might forego redeeming miles for air travel and therefore might not participate in the [loyalty] programs to the extent they previously did which could adversely affect returns on investments. A reduction in member use of these loyalty programs could impact their ability to retain their current commercial partners and members and to attract new commercial partners and members. Many of the loyalty program partners of the Corporation’s investee companies operate in the travel and/or hospitality industry. Should the business of such loyalty program partners decrease, including as a result of consumer taste change or a downturn in the hospitality and/or travel industry generally, this can have an adverse impact on their ability to generate Gross Billings for the Corporation’s investments, and therefore impact the Corporation’s return on investment adversely.”
|“Under the Arrangement Agreement, closing of the [Transaction] remains subject to the satisfaction or waiver of certain conditions to closing that have not yet been satisfied, including the receipt of Investment Canada Act approvals, the representations and warranties of the parties remaining true and correct (subject to certain materiality qualifiers), the parties having fulfilled or complied in all material respects with each of their covenants contained in the Arrangement Agreement, and as at the date of closing of the [Transaction], the Corporation shall have no more than $725 million outstanding under its credit agreement, subject to certain exclusions (the “Debt Condition”). The impact of the COVID-19 outbreak in Canada and the rapidly evolving reaction of governments and the public to the outbreak have made business planning uncertain for the exhibition and location-based entertainment industries. In response to declining attendance and certain government directed shutdowns of places of public gatherings including theatres, the Corporation is managing its business to reduce expenses in an amount necessary to offset declining revenues so that the Corporation is supporting its business and would be in a position to satisfy the Debt Condition. The possibility of prolonged closures could impact the ability of the Corporation to mitigate the related revenue decline and satisfy the Debt Condition or other of the remaining conditions on or prior to June 30, 2020.”
|6. Issuers in the manufacturing industry
|“The continued spread of COVID-19 around the globe and the responses of governmental authorities and corporate entities, including through mandated or voluntary shutdowns, may lead to a general slow-down in the economy and have led to disruptions to our work force and facilities, our customers, our sales and operations and our supply chain. Our bad debt expense may increase, our revenues and cash resources may be negatively affected and we may need to assist potential customers with obtaining financing or government incentives to help customers fund their purchases of our products. On March 16, 2020 the [Corporation] announced the temporary suspension of production in its Brescia, Italy facility as a direct result of COVID-19. The specific duration of such suspension and whether a similar suspension may be required at any additional facilities of the [Corporation] is not currently known. Any new such required suspensions or any extended suspension of [Corporation]’s operations, or that of any of [Corporation]’s suppliers, partners or customers may have a material adverse effect on the [Corporation].”
|“We face a number of business risks that could cause our actual results to differ materially from those disclosed in this MD&A. Investors and the public should carefully consider our business risks, other uncertainties and potential events as well as the inherent uncertainty of forward looking statements when making investment decisions with respect to the [Corporation]. If any of the business risks identified by the [Corporation] were to occur, our business, financial condition, results of operations, cash flows or prospects could be materially adversely affected. In such case, the trading price of our shares could decline. In particular, the outbreak of the novel coronavirus/COVID-19 could have a material adverse impact on us due to the potential impact of any resulting epidemic or pandemic on the supply of vehicles, general economic conditions and local operations at our dealerships or offices. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also adversely affect our business and operations.”
|“Natural disasters, such as earthquakes, hurricanes, tornadoes, floods, and other adverse weather and climate conditions; unforeseen public health crises such as the recent global outbreak of a novel coronavirus, COVID-19, and other pandemics and epidemics; political crises, such as terrorist attacks, war, and other political instability; or other catastrophic events, could disrupt our operations in any of our offices or the operations of one or more of our third-party providers and vendors. To the extent any of these events occur, our business and results of operations could be adversely affected. For example, the recent outbreak of COVID-19 in early 2020, particularly in Northern Italy where the [Corporation] offices are located, may adversely affect our employees and customers. While the [Corporation]’s employees, including those located in Italy, generally have the ability to work remotely, the extent to which COVID-19 may impact our business and results of operations and reputation remains uncertain.”
|“The COVID-19 virus has impacted many industries across many countries with the largest impact to date in China. With respect to the [Corporation], approximately 31% of the [Corporation]’s annual sales are derived from end markets in China. Of the [Corporation]’s 11 manufacturing plants, three of the larger manufacturing plants (plus the newly acquired magnet plant) are located in China. The [Corporation] operates and sells its products primarily to the automotive, aerospace, and other industrial segments. These industries and their supply chains are global and complex. It is unknown how the impact in China and other areas of the world will affect the [Corporation]’s customers and other supply chain elements.”
“The Company’s ability to manufacture and supply products and its sales revenue, results of operations, cashflow and liquidity may be adversely impacted by the ongoing COVID-19 (coronavirus) outbreak
As a result of the global outbreak of COVID-19 (also referred to as the “coronavirus”) and its declaration by the World Health Organization to be a “pandemic”, certain actions are being taken by governments and businesses in the United States, Canada, the UK, China and around the world to control the outbreak, including restrictions on public activities, travel and commercial operations. The Company has been managing certain supply delays. However, as the outbreak and the global response to it continue, the Company’s operations may be materially adversely affected by additional supply delays, shortages of labour and components, and/or partial or complete closure of one or more of its facilities (including to protect the health and safety of the Company’s employees), all which may continue for an extended time. Any inability to manufacture and deliver products to customers could result in a range of potential adverse consequences, including penalties or business interruption claims by customers, loss of business and reputational damage. Also, the outbreak may adversely affect operations of customers as a result of shutdowns or disruptions to their operations and decrease in demand for the Company’s products from customers due to reduced travel on buses or motor coaches. The outbreak may also impact the financial viability of suppliers and customers, and could cause them to exit certain business lines, or change the terms on which they are willing to provide or purchase products. Impacts of the outbreak may significantly reduce the Company’s cashflow, liquidity and its ability to maintain compliance with covenants in the Credit Facility. In addition, the outbreak could adversely affect the economies of many countries in general, resulting in an economic downturn that could adversely affect demand for the Company’s products. Given the ongoing and dynamic nature of the coronavirus outbreak, it is very difficult to predict the severity of the impact on the Company’s business. The extent of such impact will depend on future developments, which are highly uncertain, including new information which may emerge concerning the spread and severity of the coronavirus and actions taken to address its impact, among others. The repercussions of this health crisis could have a material adverse effect on the Company’s business, financial condition, liquidity and operating results.”
 U.S. Securities and Exchange Commission, “Proposed Amendments to Modernize and Enhance Financial Disclosures; Other Ongoing Disclosure Modernization Initiatives; Impact of the Coronavirus; Environmental and Climate-Related Disclosure” (January 30, 2020), online: https://www.sec.gov/news/public-statement/clayton-mda-2020-01-30; U. S. Securities and Exchange Commission, “Statement on Continued Dialogue with Audit Firm Representatives on Audit Quality in China and Other Emerging Markets; Coronavirus — Reporting Considerations and Potential Relief” (February 19, 2020), online: https://www.sec.gov/news/public-statement/statement-audit-quality-china-2020-02-19.
 McKinsey & Company, “Coronavirus COVID-19: Facts and Insights” (March 9, 2020), online: https://www.mckinsey.com/~/media/mckinsey/business%20functions/risk/our%20insights/covid%2019%20implications%20for%20business/covid%2019%20march%209/covid-19-facts-and-insights-march-9-2020-v2.ashx.
 Financial Times, “European car plants close as industry crisis deepens” (March 16, 2020), online: https://www.ft.com/content/dd76d42a-678b-11ea-a3c9-1fe6fedcca75.
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 British Airways (Financial Times, “British Airways boss warns that airline faces a fight for survival”, online: https://www.ft.com/content/f402d0e0-652e-11ea-a6cd-df28cc3c6a68); KLM (KLM Newsroom, “KLM suspends flights to China”, online: https://news.klm.com/klm-suspends-flights-to-china-update/); Delta Airlines (Delta News Hub, “Delta reduces U.S.-Europe flying starting Monday; suspends JFK to Mumbai”, online: https://news.delta.com/delta-reduces-us-europe-flying-starting-monday-suspends-jfk-mumbai); Air Canada (Global News, “Air Canada to suspend most U.S., international flights amid coronavirus pandemic”, online: https://globalnews.ca/news/6699594/coronavirus-air-canada-travel/); Air Transat (Transat, “Transat announces a gradual suspension of its flights”, online: https://www.transat.com/en-CA/corporate/media/news-releases/124302).
 Financial Times, “European car plants close as industry crisis deepens” (March 16, 2020), online: https://www.ft.com/content/dd76d42a-678b-11ea-a3c9-1fe6fedcca75.
 Financial Times, “Ford, General Motors and Fiat Chrysler agree widespread shutdown” (March 18, 2020), online: https://www.ft.com/content/feae3808-6949-11ea-800d-da70cff6e4d3.
 Financial Times, “Global stocks, oil prices and government bonds tumble” (March 18, 2020), online: https://www.ft.com/content/1b1b47d4-68bd-11ea-a3c9-1fe6fedcca75
 Andrea Kruyne, “Canadian Securities Regulators Will Provide Blanket Relief to Market Participants due to COVID-19” (March 19, 2020), online: https://www.timelydisclosure.com/2020/03/19/canadian-securities-regulators-will-provide-blanket-relief-to-market-participants-due-to-covid-19/.
The author wishes to thank Marie-Christine Valois, Gilles Leclerc and Jean-Michel Lapierre for their advice and contributions.