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Laurentian OKed for crucial step to finally exit insolvency

As LU plans a September vote on its creditors’ plan, a terminated prof who’s been told she might receive 14 cents on the dollar of what she’s owed said ‘nobody had very high hopes’

The courts have granted Laurentian University permission to hold a virtual meeting of its creditors Sept. 14, in which they will have a chance to vote on the plan of arrangement that would allow LU to finally exit insolvency restructuring.

Chief Justice Geoffrey Morawetz, the judge who has heard most matters related to LU’s insolvency over the past 18 months, told those attending the July 28 virtual hearing that he is “satisfied that it is appropriate to grant the meeting order in the form that has been submitted. I will sign that order this morning and have it issued and entered. I will provide some brief reasons. I would like to see them either tomorrow or Monday.”

A plan of arrangement is a plan put forward by an insolvent organization to pay out its creditors, and it must be approved by these creditors.

Laurentian continues to undergo court-supervised restructuring after declaring insolvency in February 2021, and filing for creditor protection under the Companies’ Creditors Arrangement Act (or CCAA).

Provided the plan of arrangement is approved by Laurentian’s creditors, the university hopes to seek a “sanction order motion” to exit insolvency on Oct. 5.

Jeff Bangs, chair of Laurentian’s board of governors, provided a written statement Thursday upon the courts giving LU the go-ahead to hold a creditors’ meeting. 

“After last week’s filing, today is an important step closer to our future – a future in which our students, faculty and staff, industry, and our community feel a renewed optimism and pride for a strong and transformed Laurentian University,” Bangs said.

Currently, the stay of proceedings protecting Laurentian from its creditors expires Sept. 31. 

Due to these timelines, Laurentian’s insolvency counsel, DJ Miller of Thornton Grout Finnigan LLP, told court during the July 28 hearing she would seek in writing a short stay extension of “a couple of weeks.”

Miller said that the “plan that Laurentian has put forward represents the best that Laurentian can offer to creditors.”

She said the decision that will have to be made by Laurentian’s creditors on Sept. 14 is “pretty stark.”

The lawyer said if the plan of arrangement is accepted, the university will continue to operate, employing hundreds of people, and providing an education to thousands of students who may not otherwise attend university.

“The pension plan will continue and would not be wound up, and therefore the continuation of the university avoids a wind-up deficit and the impact that that would have on all of the pension plan beneficiaries,” Miller said.

She said if the plan of arrangement is rejected, “without a means of compromising and releasing the claims that are against (LU) in excess of $300 million, it has no ability to continue to operate.”

As previously reported, 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.

Exactly what real estate is to be included in this sale has not yet been revealed.

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. 

In the event the plan is not approved, and Laurentian’s assets are liquidated, creditors have been told to expect 8.5 to 16.7 per cent.

“It should also be noted that without the plan support letter that was provided by MCU (Ontario Ministry of Colleges and Universities), Laurentian would not even be able to offer this level of recovery for creditors,” Miller said.

Because the sale of real estate may take up to four years, the plan is for creditors to be paid out as the sales take place, she said.

“So it's not a case of waiting until the end of four years and then doing one distribution,” Miller said.

For the plan of arrangement to pass, it must be approved by a majority of those affected creditors who are present at the meeting to vote. 

That majority must represent at least two-thirds of the total dollar value of the proven claims of those creditors present at the Sept. 14 meeting. 

With the motion unopposed, the only other person to speak at the July 28 hearing besides Miller and Chief Justice Morawetz was Liz Pilon, counsel for the firm Ernst & Young, which is the court-appointed monitor of Laurentian’s insolvency restructuring.

Pilon said Ernst & Young received creditors’ claims totalling $300 million. 

However, certain claims have been removed from the CCAA process. That includes $55 million in claims against Laurentian’s insurance, as well as $28 million in directors & officers (D&O) claims against LU’s leadership.

The monitor prepared statements of compensation claims mailed to around 1,300 individual recipients, which includes current and former employees of Laurentian, such as those terminated during restructuring last year and owed severance pay. 

However, Ernst & Young determined a number of active Laurentian employees did not actually have a claim, and that number was whittled down to 938 recipients.

The monitor said it received 55 notices of dispute, and only 17 have not yet been dealt with. “So 98.5 per cent of the claims have been completed,” said Pilon.

In terms of the plan of arrangement, Pilon said it’s Ernst & Young’s conclusion that the approval of the plan is essential to ensure Laurentian University’s ongoing operation.

The monitor recommends that creditors “vote in favour of the resolution to approve the CCAA plan,” she said.

‘Nobody had very high hopes,’ says terminated prof

In advance of the July 28 hearing, Sudbury.com spoke to Lisa Morgan, one of Laurentian’s creditors.

She is the former director of the university’s now-defunct midwifery program, one of the programs cancelled as part of LU’s 2021 restructuring.

Morgan said “nobody had very high hopes” for what would be offered to Laurentian’s creditors, including terminated employees such as herself. “So that didn't come as a surprise,” she said, adding she hasn’t decided how she’ll vote on the plan of arrangement.

She points out that LU creditors are expected to receive as little as 14.2 per cent if they approve the plan. But the monitor also predicts a payout as high as 16.7 per cent if the plan is not approved and Laurentian’s assets are liquidated.

“There’s an overlap there,” Morgan said. “Where's the incentive?”

Morgan said in addition to the fact that she’s expecting 14 cents on the dollar of what she’s owed (and Laurentian would have four years to pay it out), she’s also now underemployed, and is living with her daughter in Ottawa.

She sold her Sudbury house and can’t qualify for another mortgage because of her current employment status. 

Morgan was hoping the province would open another midwifery school in Ottawa, but that hasn’t panned out. She’s doing consulting work with a midwifery school in Yukon, but doesn’t want to move there, as her grandchildren are in Ottawa.

“So I feel like it kind of wrecked my life, looking at 14 cents on the dollar of what they owe me, and it ended my career prematurely,” she said. “So there's no good feeling.”

Heidi Ulrichsen is the associate content editor at Sudbury.com. She also covers education and the arts scene.