Laurentian University closer to exiting insolvency with Ontario court sanction of its plan
Laurentian University, the first public post-secondary institution in Canada to ever seek insolvency, is poised to finally exit the process with a court-approved plan that paves the way for a streamlined and dramatically altered institution.
The Sudbury, Ont., university will implement its plan to pay back creditors and settle claims on a day, yet to be determined, in November.
Laurentian declared insolvency and applied for creditor protection under the Companies’ Creditors Arrangement Act (CCAA) on Feb. 1, 2021, allowing it to operate while working to deal with its financial problems. During the months of financial upheaval and restructuring, more than 70 programs were cut and 196 full-time staff were terminated.
On Wednesday, an Ontario Superior Court judge sanctioned the exit plan, which has been designed to pay back creditors as well as put the university on more stable financial footing into the future.
In a news release, Laurentian’s administration said, “With this most recent approval, Laurentian is now weeks away from being able to successfully emerge from the CCAA (Companies’ Creditors Arrangement Act) process. This significant milestone should give confidence to those applying to Laurentian that they will be able to start and finish their degrees here.”
Fabrice Colin, president of the Laurentian University Faculty Association, told CBC News there’s a sense of relief among remaining faculty members now that Laurentian is moving ahead with its plan to exit insolvency.
“The focus now can be brought on rebuilding Laurentian University,” and providing students and faculty “with the appropriate support so to make the educational experience at Laurentian University the best possible,” Colin said.
Most claims resolved, says Laurentian
During exit-plan court hearing, Laurentian’s lawyer, DJ Miller, said 98.8 per cent of claims have been resolved.
She said upon the plan implementation date, about $14.6 million in cash will be delivered to NOSM University to restore their endowments, and the university will put in place a long-term exit loan of $35 million to repay the debtor-in-possession loan held by the province.
Laurentian will also be pre-funding a distribution pool to pay out priority claims that include vacation pay to staff and faculty.
Other steps that will happen prior to, or on, the plan implementation date will be the renewal and transition of the president and provost position at Laurentian.
It has already been announced that president Robert Haché and provost Marie-Josée Berger would retire as part of the university’s transition out of creditor protection.
The Terminated Faculty Committee, which represents some of the professors who lost their jobs due to Laurentian’s program cuts, said in a statement the university should never have entered into creditor protection under the CCAA in the first place.
“The decision to allow a public institution to use the CCAA process (which was designed to protect private corporations) now leaves all public institutions (including other universities, municipalities, and public institutions) vulnerable to being dismantled the same way,” the statement said.
Huntington University’s claims will also be released on the plan implementation date. Huntington was previously a federated university affiliated with Laurentian.
Finally, two documents that were sealed at the beginning of the insolvency proceedings because lawyers argued they would jeopardize restructuring will be unsealed on the plan implementation date.
As for which day that might be, Laurentian spokesperson Sarah De Blois said in an email that remains unclear at this moment.
“We do not have a specific date for plan implementation,” the email said.
“Plan implementation will occur after all of the conditions to closing as set out in the plan are met. We currently expect that to be in the month of November 2022.”
The university is also committed to develop a new strategic plan and take steps to conduct an operational transformation as outlined in reports commissioned from Nous Group.
A request will be made to the province to change legislation to allow representation from the faculty and staff unions on the university’s board of governors.
That transformation, the university’s lawyer said, will cost about $30 million.
In addition, Miller noted that Laurentian has spent very little on keeping up its infrastructure during its insolvency, has accrued $200 million in deferred maintenance costs, and that it is important that it catch up.
Both Miller and the lawyer for the court monitor emphasized this plan is much better for creditors than if it had been rejected and Laurentian had gone bankrupt.
Miller said claimants will receive between 14.1 and 24.2 per cent of their claims as opposed to between 8.5 and 16.7 per cent if the university had ceased operations and been liquidated.
The variability in the payback depends mostly on proceeds from the sale of real estate to the province.
Upon wrapping up the sanction hearing, Ontario Chief Justice Geoffrey Morawetz said this has been a difficult and challenging process for all involved.
“It’s taken about 21 months I think from start to finish and there’s been a number of highly contested matters throughout but a compromise has been arrived at and it has been approved by the creditors and affected parties and under very difficult circumstances,” said Morawetz.
“I do hope this provides a resolution to the past and a roadmap to the future for Laurentian University, for its students, its professors, all its employees and for the City of Sudbury. It has been a challenging time and I hope there are better days ahead.”