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Lawyer: Better to let Laurentian ‘go bankrupt’ than court approving motion putting it in ‘impossible situation’

University of Sudbury lawyer speaks out against $10M loan condition requiring the termination of LU’s agreement with three federated universities
UniversityofSudburyWinter2020_3Sized
University of Sudbury. (File)

A lawyer representing the University of Sudbury says we’re “better off" having Laurentian University go bankrupt if the only thing that’s going to stop that from happening is the courts “approving notices of disclaimer that should never be approved.”

The University of Sudbury had its turn at an April 30 court hearing to speak out against Laurentian University’s plans to terminate or “disclaim” a more than 60-year-old agreement that goes back to the university’s creation.

Laurentian, which shocked the community when it declared it is insolvent this winter, has been undergoing court-supervised restructuring over the past three months under the Companies Creditors’ Arrangement Act (CCAA). 

It has spent the past two days in court on matters related to its restructuring plans, including massive program and job cuts recently announced by the university.

Another one of its plans is the termination of the 1960 federation agreement with the three federated universities operating on campus, the University of Sudbury, Huntington University and Thorneloe University.

Thorneloe University, which said the situation will precipitate its bankruptcy, already spoke out against Laurentian’s plan to terminate the federation agreement at an April 29 hearing before Chief Justice Geoffrey Morawetz

The University of Sudbury matter was heard Friday by Justice Cory Gilmore. This hearing was bilingual, with French-to-English translation provided for participating anglophones.

A decision on both matters is expected to be released by late Sunday. 

(For its part, Huntington has reached a transition agreement with Laurentian, which includes LU’s purchase of its popular gerontology program, and is not fighting LU’s actions in court).

Laurentian is looking for a further $10-million in debtor-in-possession (DIP) funds on top of the $25 million it has already borrowed. These funds will give it enough money to operate through the rest of the spring and summer.

The university’s spring term is actually supposed to start on Monday. Whether or not these classes go ahead hangs on LU securing more DIP funds and the court’s approval of its restructuring.

One of the conditions attached to this $10-million DIP from lender Firm Capital Mortgage Fund Inc. is the termination of the agreement with the three federated universities.

Both the University of Sudbury and Thorneloe take issue with the terms of the loan.

Ronald Caza, the University of Sudbury’s lawyer, said Friday that the terms of the DIP loan put the courts in a bad position, likening the DIP lender at one point to the “tail wagging the dog.”

“We’re in an impossible situation, some would say,” he said. “This is an improper use of the notice of disclaimer. You don’t have any choice but to allow it, because if you don’t, Laurentian University is going to go bankrupt.

“I guess what we’re telling you is this: the credibility of our whole insolvency and bankruptcy system rests on the public having faith that decisions are going to be made pursuant to applying the law and not because we’re being intimidated or coerced by DIP lenders that are going to start dictating conditions that include accepting notices of disclaimer that should never be accepted.

“We are better off having Laurentian University, if that’s going to be the result, go bankrupt, if the only thing that’s going to stop them from going bankrupt is for the court to be approving notices of disclaimer that should never be approved, because they’re baseless, and they’re wrong.”

Laurentian looks at the termination of the federation agreement as a source of untapped revenue. It says it transferred $7.7 million in 2020 to the three federated universities, which offer courses that count toward Laurentian degrees. 

The university wishes to keep these funds for itself by channeling the students taking courses at the three federated universities to Laurentian courses instead.

The University of Sudbury has been forced to cancel all of its spring courses because of Laurentian’s move to terminate the federation. 

The federated university announced plans last month (ahead of Laurentian’s announcement) to become a Francophone-only university, and actually requested -- unsuccessfully -- that Laurentian transfer all of its French-language courses to the Univeristy of Sudbury roster.

“We have a university that has asked to put an end to a relationship they have with the federated universities for the only reason as to choke them out,” said Caza, calling the situation a “cash grab.”

Caza raised concerns under the French Language Services Act, saying that Laurentian has cut 40 per cent of its French-language courses, and if that weren’t enough of a “slap in the face to the Francophone community,” it’s also cut the University of Sudbury’s capacity to offer Francophone courses.

Laurentian University’s lawyer, DJ Miller, reaffirmed Laurentian’s commitment to its bilingual and tricultural mandate, even in the face of the cuts.

She also referred to Caza’s statement regarding letting LU “go bankrupt” being preferable to the courts allowing the termination of the federation agreement as “extraordinary,” adding she’s never before heard anything like that in CCAA proceedings.

Miller said if Laurentian were to cease to exist, it would mean 9,000 students would be displaced. 

For its part, the DIP lender, she said, just wants to ensure it gets repaid.

“This is not a case of the DIP lender has said jump, and the university has said how high, and issued notices of disclaimer,” Miller said.

“It happens to be the case that in a scenario where you have an unsustainable financial model, you cannot have $7.7 million continuing to flow out of the university to teach students in programs and courses that are Laurentian students and that Laurentian has the ability, the capacity and the faculty to teach.”



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