Laurentian University is asking for permission to extend its restructuring efforts into the new year, documents filed before the courts reveal.
The university is in court once again Aug. 27, asking that the stay of proceedings protecting it against its creditors be extended until Jan. 31, 2022.
At the same court date, Laurentian is also asking that the maturity date for more than $35 million in bridge financing loans also be extended until Jan. 31, 2022.
The university announced Feb. 1 it is insolvent, and had filed for creditor protection under the Companies Creditors’ Arrangement Act (CCAA), a move that’s unprecedented in the post-secondary sector.
Laurentian, which had $321.8 million in liabilities as of April 30, 2020, said it would have run out of cash to meet its payroll obligations by the end of February if it hadn’t secured a $25 million debtor-in-possession (DIP) loan through the insolvency process.
Under the auspices of the CCAA, Laurentian is undergoing court-supervised restructuring. That includes massive cuts to its programs and employees, which were made public April 12, as well as the termination of ties to federated universities operating on campus.
The most recent court documents say these changes “within the CCAA proceeding to date has resulted in cost savings for LU of approximately $40 million/year, representing a reduction of 25 per cent to its annual expenses.”
Also in the spring, Laurentian secured another $10 million DIP loan and another four months of creditor protection, which currently expires Aug. 31.
Court documents say that Laurentian “expects to be in a position to have identified the necessary exit financing in order to re-finance and fully repay” its DIP loans as of Jan. 31.
“In the coming months, the applicant intends to develop a process to solicit competitive bids for re-financing the DIP Facility and providing exit financing,” said the court documents.
Laurentian and the DIP lender have settled on the terms of an amendment to extend the loan's maturity date to Jan. 31, 2022 in exchange for a one per cent extension fee of $350,000, according to Laurentian president Robert Haché's latest affadavit. That means Laurentian will owe more than $35 million in total to the DIP lender.
Laurentian said extending the stay of proceedings protecting it from its creditors until Jan. 31 is necessary to develop a “plan of arrangement” acceptable to its creditors, which it will need to start paying back.
It also needs the time to complete “the process of the real estate and governance/operational reviews being conducted to promote efficiencies and accountability.”
Laurentian is currently in Phase 2 of its restructuring, which includes review of its assets and real estate holdings to see if they can be monetized, as well as coming up with a plan to deal with its creditors.
Phase 3 of its restructuring comes up in the fall, which will include a governance review looking at the university’s operations, the implementation of the university’s new academic structure, as well as more work with its creditors.
Laurentian’s creditors include about 1,200 current, former and retired employees owed money as a result of the university’s insolvency.
Last week, Laurentian was in court to ask that a compensation methodology for these employees be approved.
Chief Justice Geoffrey Morawetz issued his endorsement of the methodology Aug. 18.
However, the matter of some non-Laurentian employees (such as those working for federated universities) who were enrolled in the university’s retiree benefits plan (RHBP) still needs to be dealt with Aug. 27.
Both Huntington and Thorneloe universities have objected to Laurentian’s RHBP compensation methodology plan, as they say employees with these institutions will end up with less money than their Laurentian counterparts.
Morawetz agreed to hear the matter during the Aug. 27 court date, as lawyers for both Laurentian and the other parties hope an agreement can be reached by that time.
