Court documents released this week outline a long-term borrowing agreement between Laurentian University and the provincial government to replace $35 million in bridge loans taken out by LU during its insolvency.
In early 2021, Laurentian declared insolvency and filed for creditor protection under the Companies’ Creditors Arrangement Act (CCAA), making widespread cuts to its programs and employees in April of that year.
The university hopes to exit the CCAA in November after creditors voted in favour of a debt plan.
Also known as the plan of arrangement, the debt plan has several conditions for its implementation, including putting in place exit financing for the $35-million long-term loan with the province.
Laurentian is set to go before the courts Nov. 1, asking for the loan agreement to be approved.
The loan agreement would see Laurentian repaying what it owes by April 30, 2038, in annual payments of principal and interest, at an annual rate of interest equal of 6.106 per cent.
The amortization schedule would see Laurentian repaying $591,693 on the principal and $884,115 in interest as of April 30, 2023. You can view the full amortization schedule on page 80 of this court document.
There are some conditions attached to the loan, including a lien on its property.
“LU will grant a continuing security interest and a first-ranking Lien in favour of the Lender over all of the Collateral (subject only to Permitted Liens) over its right, title and interest in all present and after acquired real and personal property pursuant to the Security Documentation,” said the court document.
Laurentian must also periodically report to the lender (the province) “with respect to financial, operational, governance and other matters.”
It must also “develop and implement the Strategic Plan and the Transformation Plan, as previously contemplated in LU’s overall restructuring strategy and as described in earlier Affidavits and the Plan,” in a manner acceptable to the lender.
Laurentian must also “maintain compliance with certain financial covenants,” said the court document.
The loan agreement includes some strict conditions for Laurentian University.
For example, LU is required at all times to “permit representatives of the Lender to enter into or onto its property, to inspect any of its properties and to examine its financial books, accounts and other records and to discuss its financial condition, operations and other related matters with the Borrower’s administrative officials, management, senior officers and auditors.
It must also “keep accurate and complete books and records of account together with all supporting documents in accordance with applicable generally accepted accounting principles.”
Laurentian is also not to incur any debt exceeding $10 million, and it is also not to make “any acquisition, investment or capital expenditure” exceeding $10 million without the approval of the province, which is LU’s lender.
The loan agreement also gets into leadership renewal at Laurentian University.
The university announced this past summer both president Robert Haché and provost and vice-president, academic Marie-Josée Berger would be retiring prior to the university’s emergence from the CCAA.
The loan agreement said Laurentian is required to prepare a written assessment within one year of the CCAA implementation, or another date agreed upon with the province, “of the required scope, timing and implementation of renewal processes for the Borrower’s senior management and Board of Governors.”
Heidi Ulrichsen is Sudbury.com’s associate content editor. She also covers education and the arts scene.
