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On the one-year insolvency anniversary, we ask what will Laurentian 2.0 look like?

What is Laurentian’s future? We explored this question, among other topics, with the new chair of LU’s board, union leaders and a post-secondary consultant
Laurentian University.

The president of the Laurentian University Faculty Association said he had no idea at the end of January of 2021 that the university was planning to declare insolvency.

One year ago, on Feb. 1, 2021, Laurentian University said it was out of money, and filed for creditor protection and restructuring under the Companies’ Creditors Arrangement Act (CCAA).

It was an unprecedented move for a Canadian post-secondary institution, taking both academia and this community by surprise.

“No, it came as a shock for everybody,” said Fabrice Colin, president of the Laurentian University Faculty Association (LUFA). 

That’s despite the fact that Laurentian, which was in collective bargaining talks with the union at the time, had been “claiming financial difficulties for some time before,” he said.

“But that was totally unexpected, especially given that, you know, the CCAA proceedings are totally inappropriate for a not-for-profit and public institution,” Colin said.

He said it could have been avoided through “better transparency and accountability,” government intervention, or using the “financial exigency” clause in LUFA’s collective agreement, which he said would have allowed for carefully-thought-out cuts.

Financial exigency, he said, is a “emergency evacuation plan,” but by filing under the CCAA, “the minute there was smoke in the building, they just chose the emergency plan by the window."

Since Feb. 1 of last year, Laurentian has received its share of press as it implemented massive layoffs and program cuts, severed its relationship with the federated universities operating on campus and engaged in a court fight with the Ontario auditor general and the Ontario legislature as it attempts to keep certain documents private.

Just last week, a court decision was released saying Laurentian must release most documents demanded by the Ontario legislature through a rare Speaker’s warrant, although some covered by court orders are still being kept private pending another hearing.

Laurentian has said it will comply with its legal obligations in relation to the Speaker’s warrant (the documents must be delivered by today, Feb. 1, at 5 p.m., under the threat of imprisonment for LU’s president and its former board chair).

Unsurprisingly, Laurentian has seen a drop in enrolment for this school year, and applications are also down sharply for the next school year.

The university still needs to come to a “plan of arrangement” to pay out its creditors, among other processes related to its insolvency restructuring. 

Those also include reviews by third-party consultants of its real estate holdings it hopes to “monetize,” along with its governance and operations.

Laurentian, which was recently granted creditor protection until May 31, has said restructuring could possibly last until late 2022.

The Ontario government also recently stepped in, taking over Laurentian’s $35-million “debtor-in-possession” loan in exchange for changes to the university’s board of governors. 

This included the resignation of several members, including chair Claude Lacroix, and the appointment by the province of several new members. The five new board members appointed included Jeff Bangs, a man with strong ties to the Ontario Conservatives, who was named the university’s interim board chair.

On the occasion of the one-year anniversary of Laurentian declaring insolvency, wondered about the university’s future, and what it’s going to take for LU to recover. We reached out to several stakeholders on the issue.

So what will “Laurentian 2.0,” as the university has dubbed its future, look like? 

Colin said he hopes that in a year’s time, Laurentian will at least be out of the CCAA process. 

He’s also hoping Laurentian gets some answers to what has happened through the value-for-money audit that’s underway by the Ontario auditor general.

Laurentian needs to comply with the Speaker’s warrant “and stop also wasting valuable resources and money in opposing transparency,” said Colin, who added the university also needs a change in leadership.

As for how long it’s going to take Laurentian to recover from this situation, Colin said he wishes he had a “crystal ball,” but a lot of that is going to depend on the finances of the university. He said things should become more clear by April.

“So from what President (Robert) Haché has said so far, they are envisioning quite a substantive surplus, which is encouraging,” he said.

“It’s encouraging, also, that the government announced a few weeks ago some significant support, which will be welcome. It's just unfortunate that it came too late for many faculty members and students.”

Colin said there has been some damage to Laurentian’s reputation through the CCAA process, but he’s confident it can recover … eventually. 

“Laurentian 1.0 as opposed to Laurentian 2.0 was beautiful,” he said. “And we know we can be there again.” also reached out to Haché, Laurentian’s president, for an interview on the one-year anniversary of the university’s CCAA filing, but the university declined our request.

Haché did write a letter to the community on the occasion of the one-year anniversary of LU’s insolvency, which we will run in its entirety on later today. 

The university president said in the letter rebuilds are rarely popular options, as it means you need to “take your lumps for a while until things get better.” However, he said brighter days are on the horizon for Laurentian.

While Haché was not made available for an interview, we were able to speak with Jeff Bangs, the new chair of Laurentian’s board of governors, and one of the province’s new appointees to the board. 

A native of Mattawa, Bangs now lives in Southern Ontario, and works as a government relations advisor and strategic consultant. He acted in this capacity for Laurentian University for a year before being appointed to the board.

Bangs also has ties to the Ontario Progressive Conservative Party, having worked as an advisor to ministers and premiers. He said while he’s proud of his time in politics, he doesn’t see his new role as a political one.

“I see this as a task that we're all invested in, to stabilize Laurentian and to chart a brighter future for it,” he said.

Bangs points to the operational and governance review of Laurentian that’s recently been completed by a consultant, and will be released shortly. 

This document looks at “what is lacking at the end of the university today and what needs to be put in place to stabilize it and make it stronger in the future.”

And what will Laurentian look like in a year’s time, and further into the future?

“You know that the university didn't get into this situation quickly, it took many years, and it's going to take a few years to make things better,” Bangs said. “I think everyone understands that.”

He said it’s hard to put an “exact timeline” for how long it’s going to take Laurentian to recover from this situation.

“This is a unique circumstance where a publicly funded university finds itself in this circumstance,” Bangs said. “There is no roadmap for this.”

For Tom Fenske, president of the Laurentian University Staff Union (LUSU), the university’s future is currently murky.

Fenske represents staff members at LU, including clerical and secretarial employees, technicians, technologists and more.

It’s hard to get a picture of LU’s future, Fenske said, because not all the information has come in yet. He points to a couple of reports that will shape Laurentian in the years to come, but have yet to be delivered, including the real estate review and the operational and governance review.

“And I really wish that was the focus right now, not a public fight with the government of Ontario and the auditor general,” Fenske said, referring to the events of the last couple of months.

He said the university’s focus should really be on emerging from the CCAA.

Asked if he thinks Laurentian will survive this process, Fenske said he and many other people have spent a significant amount of time making sure that’s the case.

“It’s an integral part of Sudbury, and we have a really good thing,” he said.

He said he won’t be happy until Laurentian’s current senior leadership – specifically president Robert Haché and vice-president, academic Marie-Josée Berger, both fairly recent additions to the university – are gone.

“There’s absolutely no way to build trust with these two individuals,” Fenske said.

The union leader said the provincial financial support package announced in December was incredibly important to Laurentian’s future. 

“I think it's really significant,” he said. “I mean, the signal to us and everyone else that the university, the government wants Laurentian to succeed, and the fact that they're going to do their part to try to help us.”

Alex Usher, a post-secondary consultant and the owner of Higher Education Strategy Associates, has commented extensively on Laurentian’s situation (you can read a detailed analysis he did on LU in a recent series of blogs on his website here).

From an operational standpoint, Laurentian won’t probably look much different a year from now than it does now, Usher said.

Laurentian has already seen “the largest set of cuts at a university in Canada, ever. So I don’t think that side of things is going to change much in the next 12 months.”

But what will be formative for “Laurentian 2.0” is what the university will be paying its creditors, which are mainly former employees and the banks to whom it owes money. Roughly $360 million in claims have been filed by Laurentian’s creditors.

If Laurentian ends up paying “10 cents on the dollar,” Usher said, and finds someone to finance the debt, stretching the loan out over 10 years, “great. Then I think the argument that (LU president Haché) has made that Laurentian could emerge stronger from this is actually true.

“If they're paying 90 cents on the dollar and it all has to be paid back in two or three years, they're screwed. So we just don't know, right? It all depends on what the deal is with the creditors. And I don't know what that's going to look like.”

Usher said he suspects the banks have a vested interest in keeping Laurentian in CCAA proceedings going as long as possible, as they’re hoping the province steps in and pays off the debt. 

He said Laurentian will survive because “it is too big to fail. No one's gonna leave Sudbury without a university. That's just not going to happen.”

His assessment of the situation is that throughout the course of the 2010s, Laurentian was trying to transition from being a smaller university like Lakehead to being one more like Guelph, and it ran out of money.

“That dream, which is not an impossible dream, has been set back by 20 years,” Usher said.

In terms of recovering from the events of the past year, Usher said that depends on what you mean by recovering. He said his guess is Laurentian will be financially solvent as soon as it exits the CCAA.

When will Laurentian get back to 2019 or 2020 enrolment levels? He said he figures LU has scared away GTA students for the next four or five years, and probably international students for a couple of years, too. 

“I think you're probably looking at five to 10 years of nursing your wounds, and 10 to 15 of building them back,” Usher said. “And, yeah, once a generation passes, you can be back up to where you were in 2019.”

Despite the faculty association’s assertion that Laurentian could have used the exigency clause in its collective agreement to make cuts rather than using the CCAA, Usher said that wasn’t going to work in Laurentian’s situation, as it was facing a liquidity crisis.

“Exigency is totally useless as a means of dealing with a short-term cash crunch because exigency raises your costs in the short term,” and takes a long time to complete, Usher said.

He does, however, think Laurentian was considering the exigency route until fairly late in the game, as a leaked report said it had asked the province for $100 million to restructure, and the province came back with a $12 million offer.

“They didn’t ask the province for $35 million to get through to the spring,” Usher said. 

Regarding the province’s recent financial package for Laurentian, Usher said “it’s a complete mystery to me why they couldn’t have done that 11 months ago.”

Asked about the implications of Laurentian’s situation for other financially struggling universities in Canada, Usher said he’s tempted to say not much, “because nobody else goes around creating $50 million in unsecured debt.”

However, it has made everyone from faculty unions to lenders aware that there “isn’t necessarily a government backstop on universities.

“It was beyond anyone’s imagination that CCAA was a possibility,” Usher said.