With creditors narrowly voting in favour of Laurentian University’s plan of arrangement Wednesday, the insolvent university cleared a major hurdle to finally being able to exit creditor protection.
“It's positive, because for the past couple of years, Laurentian’s had a cloud over it,” said Laurentian board chair Jeff Bangs, reacting to the news of the Sept. 14 “yes” vote.
“In some ways, we’ve had our hands tied behind our back, and now we have an opportunity to take back control and to demonstrate that we can implement this plan of arrangement that includes new systems and new people to take this university forward.”
Laurentian has been undergoing court-supervised restructuring since declaring insolvency in February 2021, and filing for creditor protection under the Companies’ Creditors Arrangement Act (or CCAA).
A plan of arrangement is essentially a plan put forward by an insolvent organization to pay out its creditors, and it must be approved by these creditors.
Sources present at the Sept. 14 creditors meeting told Sudbury.com the plan of arrangement passed by a slim margin.
It had to be approved by a majority of the affected creditors who submitted votes. The votes also had to represent at least two-thirds of the total dollar value of proven claims of creditors participating in the vote.
The plan of arrangement was approved by 87.4 per cent of the number of eligible voters who cast ballots, which means the first test was met.
The second test was also met, but by a much narrower margin. Creditors representing 68.9 per cent of the total value of the claims voted in favour, meaning the vote was only 2.2 per cent over the two-thirds threshold.
Asked about this narrow margin, Bangs said, “I can’t really speculate on that. I mean, the result is what it is. We're grateful that we met the thresholds required. And now everything shifts to the future.”
He said at the same time, “we have to respect the views of those who did not vote for a plan, and they're very passionate. They voted that way for a reason.
“And really, this next phase, in addition to all of the transformational work we have to do on campus, we have to rebuild relationships, we have to demonstrate to people who weren't prepared to vote in favor today that we have the university's best interests at heart going forward.”
University goes back to court Oct. 5
Laurentian now expects to go back to court Oct. 5 to seek a “sanction order motion” to exit CCAA creditor protection.
Bangs explains that during the upcoming court date, the judge will be asked to ratify the results of the plan of arrangement vote, and that "gives us the green light to proceed to plan implementation, or also known as the date of emergence.”
He said there will be a period of 21 days after the judge’s ruling in which parties will have a chance to appeal. “I'm not a lawyer, but I've been briefed on this, and I understand it’s not an easy bar to reach,” Bangs said.
Laurentian's plan of arrangement: an explainer
Under the terms of the plan of arrangement, a pool of cash of up to $53.5-million for Laurentian’s creditors is to come from the sale of university real estate to the province of Ontario, as per an agreement this spring with the province.
The minimum floor for the pool of cash has been set at $45.5 million.
Except for some classifications of creditors who will be paid out in full, court filings have provided creditors with an estimate of a 14.1- to a 24.2-per-cent recovery on what they’re owed.
If the plan had been rejected, Laurentian said the most likely outcome would have been liquidation, with the university’s operations shut down or sold off, or possibly transferred to another university.
Liabilities such as the claims of creditors, the wind-up of the pension plan and other matters would have been dealt with in a liquidation proceeding such as bankruptcy, said Laurentian.
On Sept. 9, just days before the plan of arrangement vote, Laurentian filed an amended plan of arrangement with the court, following an update received from the province of Ontario.
As a result of the province’s continuing assessment of Laurentian’s properties, the province said it can purchase the designated real estate assets from LU within three years of plan implementation instead of the four years originally contemplated.
This essentially means its creditors would get a faster payout.
Bangs said he thinks moving up the payout date for creditors was helpful as Laurentian went into the plan of arrangement vote. “It didn't change a whole lot other than it will give some creditors comfort that they're not going to have to wait as long,” he said.
Terminated professors: Tragic day for university education
Two unions representing Laurentian employees, the Laurentian University Faculty Association (or LUFA) and the Laurentian University Staff Union (or LUSU), recommended members vote in favour of the plan of arrangement.
But a couple of groups formed as a result of Laurentian's restructuring have been urging creditors to reject the plan of arrangement.
The terminated professors group said Wednesday the vote in favour of Laurentian’s proposed CCAA plan of arrangement marks a tragic day for university education in Sudbury and Northern Ontario.
Eduardo Galiano-Riveros, one of the terminated professors, said the vote legitimized the use of the CCAA, which was designed for the private sector, to “skirt around the existing collective agreements” at a university.
“It was an engineered and the weaponized use of a legal mechanism which was never intended for universities,” he said. “And you see the result. Basically, you're left with a shell of a university, a decimated university.”
While Galiano-Riveros said his group is disappointed, he said they knew all along that getting creditors to actually vote down the plan of arrangement was “a long shot.”
“We are just a handful of terminated members working with zero budget, and I think we gave them a run for their money,” he said.
“We installed the narrative of ‘No, this is not the only way to do it, there's another way out, a more equitable, fair way out.’ Proof of the fact that what we were doing was actually working and has worked is the fact that four days ago on Friday, the university at the very last moment came out with a softening of the terms of the plan of arrangement, reducing the payout period from four years, which was the initial proposal, to three years.”
Faculty association: ‘New chapter’ for Laurentian
Laurentian University Faculty Association president Fabrice Colin said that on one hand, the union is pleased creditors voted in favour of the plan of arrangement.
It marks a “new chapter” for Laurentian University, because it will finally be able to exit the CCAA proceedings.
“But on the other hand, it doesn't make up for all the pain and the suffering inflicted upon students, faculty members, staff members and the community at large, and all of that due to mismanagement and provincial government inaction,” he said.
Following the “yes” vote on the plan of arrangement, there’s “a lot of relief on campus,” added the president of the other major union representing Laurentian employees, the Laurentian University Staff Union.
“I think that the idea that Laurentian wouldn't exist would have been catastrophic,” said Tom Fenske, while acknowledging there’s a lot of mixed emotions because of what it means for the creditors and people who lost their jobs.
Laurentian board chair: ‘Hard work begins today’
Board chair Jeff Bangs said in some respects, “the hard work begins today,” as Laurentian now has to implement the plan of arrangement.
That includes not only paying out creditors, as outlined above, but also developing a new strategic plan, reforming its governance and hiring new leadership.
The auditor general’s full report on Laurentian’s finances is also expected out in the near future, and Bangs told Sudbury.com last week he intends to pay close attention.
The departure of the university’s president, Robert Haché, as well as its provost and vice-president, academic, Marie-Josée Berger, are included as part of the debt plan’s terms. The university said this summer they were to depart prior to LU’s emergence from the CCAA.
Sudbury.com asked Bangs this week for any updates regarding the administrators’ departure, and he said while he can’t be too specific, he did say “they will be departing later this fall,” and a recruitment process is underway.
In terms of which buildings the province plans on purchasing, Bangs said that’s going to take some time yet. Right now, the province occupies space in some of Laurentian’s buildings.
“So in some respects, the role is going to be reversed,” he said. “So instead of being the landlord, we're going to become a tenant in some cases, and the province will be the landlord.”
Heidi Ulrichsen is the associate content editor at Sudbury.com. She also covers education and the arts scene.