Struggling Canadian tour operator Transat AT said on Thursday it would borrow up to C$700 million ($569.71 million) from the Canadian government and use a portion of the funds to reimburse customers whose travel plans had to be canceled.

The news comes barely a day after Reuters reported that Transat was close to reaching a financial aid deal with the federal government involving a loan.

Transat was already struggling due to the COVID-19 pandemic when Air Canada dropped its merger plans with the company earlier this month, creating uncertainty for the Montreal-based operator of leisure carrier Air Transat.

Transat said it would use C$390 million to support the company's liquidity needs until its business has recovered enough to generate cash and the rest to reimburse travelers.

Transat has suspended flights until June due to pandemic restrictions that have battered travel and has said it needs at least C$500 million in financing this year.

It has repayment obligations due on April 29 for a C$50 million revolving facility and a C$250 million short-term loan that matures on June 30.