After 15 months, Laurentian University said it plans to take critical steps in the near future toward finally exiting the insolvency restructuring process under the Companies’ Creditors Arrangement Act (or CCAA) as it comes up with a plan to pay out its creditors.
Court documents filed late last year said close to 1,500 claims totalling around $360 million were filed by creditors against LU.
Laurentian president Robert Haché said last month the university’s goal is to file a plan of arrangement by May 31, which is when the stay of proceedings protecting LU from its creditors expires.
Sudbury.com, however, learned this week that Laurentian plans to seek an extension of the stay of proceedings at the end of this month.
Motion materials which provide details on the status of Laurentian’s restructuring will be available on or about May 23, LU said in a statement this week.
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.
Haché said last month talks were still ongoing with the university’s stakeholders for the terms that will be offered under the plan.
Prior to filing said plan, though, Haché said those terms need to be negotiated and included in court materials, which he said last month would be served by mid-May. It’s unknown at this time if Laurentian still plans to follow this timeline.
Haché said this past winter that when the university returns to court in May, it expects to present a request to the court for a “meeting order.”
He explained that a meeting order is the order that authorizes Laurentian to schedule a meeting of creditors to vote on a formal plan of arrangement.
What the expert had to say
To get some perspective on what Sudburians should expect from the plan of arrangement, we recently reached out to Ted Mann, an expert in the area of insolvency law and a professor in the University of Ottawa’s faculty of law.
Mann said he has been following the Laurentian University insolvency case with interest, and in fact has referred to it in his bankruptcy and insolvency course this past fall.
He said that generally speaking, a plan of arrangement is “a plan which calls for payments to be made to the creditors in satisfaction of their debt, and the payments are usually significantly less than the amount that's owing.”
The plan of arrangement must be approved by a majority in number of each class of creditors, representing two thirds of the value of the claims in each class and must subsequently be sanctioned by the court in order to become a binding settlement between the debtor company and all of its creditors.
Mann said there are generally two classes of creditors: secured creditors, “who have liens against real estate or personal property of the university,” and; unsecured creditors, “those who provided product services, and I think probably employees as well, who have no security for their debt.”
Ernst & Young, the court-appointed monitor of Laurentian’s insolvency restructuring, said in a recent court document that more than 1,300 former and active employees had claims against the university as a result of the insolvency restructuring.
That includes the 194 full-time workers laid off by Laurentian last spring as part of its efforts to trim costs.
Mann said negotiations have been going on behind the scenes prior to the presentation of the plan of arrangement because the university will want to have a plan “that will be satisfactory to the creditors and will receive their approval.”
“So they'll be talking to the major creditors to make sure the proposal they're making will fly with them. And then they will be dealing with the lesser creditors there also," Mann said.
He said he wouldn’t be surprised if government made some money available to creditors within Laurentian’s plan of arrangement.
“I should think from the stand standpoint of the government, Laurentian did fill a hole in the academic picture of the post-secondary academic picture of the province,” Mann said.
“They would want to see that hole filled in order, for example, to service the northern communities that look to Laurentian to provide the programming to support their communities. That's the kind of thing that I have no doubt the government would want to see continued. And so I think the government would have a vested interest in putting in money to make sure that happened.”
As previously mentioned, a plan of arrangement normally involves creditors receiving a very small percentage of what they’re owed, and that also includes employees, Mann said.
However, what is paid out depends on the total owing and the projected revenue by the insolvent organization.
“Whatever plan they propose has to be doable within the context of what their financial picture looks like,” Mann said. “That's why you tend to have cents in the dollar is because they still have to make enough money in order to be able to make payments against the arrangement.”
The president of the Laurentian University Staff Union (LUSU) said his union has been involved in the plan of arrangement negotiations, but he can’t say too much about what is going on for confidentiality reasons.
Tom Fenske did say that both LUSU and the Laurentian University Faculty Association (LUFA) are fighting for their members as these negotiations are ongoing.
It’s a “conversation back and forth,” said Fenske. “It’s taking forever, right? Like we were waiting for them, then, you know, they kind of send us something, we comment on it, and then they go back.
“I can't even go further than that, and give away things. But it's still being discussed.”
Fenske said he’s glad that the university has finally reached the point of presenting a plan of arrangement.
“It's been so long, and it's been hard on everybody,” he said.
“It's hard on the members, it's hard on the people that lost their jobs. And, you know, how do you get to the next phase or everything while you sit and wait for this, right? So yeah, I think everybody wants to move past this, right?”
Heidi Ulrichsen is the associate content editor at Sudbury.com. She also covers education and the arts scene.
