.jpg;w=960)
Laurentian University’s declaration of insolvency and filing for creditor protection as it engaged in court-supervised restructuring is undoubtedly one of the top stories of the year locally.
The university’s filing under the Companies Creditors’ Arrangement Act (CCAA) Feb. 1 shocked the Greater Sudbury community.
Given that a CCAA filing by a post-secondary institution was previously unheard of, Laurentian has also grabbed headlines nationally over the past 11 months.
Court documents associated with the CCAA filing show that as of April 30, 2020, Laurentian had liabilities with a total book value of $322 million, and owed $91 million to three different Canadian banks.
Laurentian had been experiencing recurring operational deficits in the millions of dollars each year for the past number of years, and the university also had a number of “structural issues” causing financial challenges, the court document said.
The university’s situation was blamed, among other reasons, on the university’s building spree in recent years that failed to attract more students, LU having a large number of programs relative to its number of students and the terms of the collective agreement with faculty being “above market.”
With the CCAA filing, Laurentian gained access to a $25 million debtor-in-possession (DIP) bridge loan. That amount has since been increased to $35 million.
Laurentian said that without that DIP loan, it would have run out of cash to meet its payroll obligations by the end of February.
Court filings show that all of Laurentian’s funds, whether for operations (such as operating grants or tuition funds) or restricted purposes (such as research grants and scholarships) were comingled in the same bank account.
But as of early February, the amount in this account “was insufficient to cover obligations.” This raised questions from parties such as Laurentian researchers and donors, who want to know if the money is lost.
While it’s safe to say Laurentian’s unprecedented CCAA filing came as a shock, we did already know the university was having financial troubles in 2020.
The university said in the spring of 2020 it was facing a deficit, and some cost-cutting measures were put in place that year.
Laurentian University president Robert Haché, who only joined LU in 2019, spoke to Sudbury.com about the university’s financial troubles in the fall of 2020.
That conversation also touched on the university bringing on external financial advisers Ernst & Young, a company that has since become integral to LU’s restructuring.
We’ve since learned that the university was already looking into declaring insolvency in 2020.
Haché has recently confirmed the university “began engaging with external legal counsel regarding the financial challenges that we were facing in the spring of 2020.”
The university president’s initial affidavit from January 2021 shows Ernst & Young were engaged Aug. 28, 2020 to assist in its restructuring efforts, and, if necessary, to become the court-appointed monitor of Laurentian’s restructuring under the CCAA (which, of course, is exactly what happened in February 2021).
In early April, on what has been dubbed “Black Monday,” the community learned that Laurentian had cut 58 undergraduate and 11 graduate programs and 194 full-time positions (116 full-time faculty, 41 unionized staff and 37 non-union jobs).
Laurentian said at the time it anticipated that approximately 10 per cent of undergraduate students (excluding those studying at the federated universities) would be affected in some way by these program adjustments, as well as 44 graduate students.
A student whose program was cancelled described “Black Monday” as “catastrophic” and involving a lot of crying.
The Laurentian employees were told they were losing their jobs via group Zoom meetings.
Some Laurentian staff members belonging to the Laurentian University Staff Union (or LUSU), have now been hired back.
Meanwhile, the Laurentian University Faculty Association (LUFA) said the university’s faculty complement is even lower today than it was after the cuts this spring.
LUFA has filed a grievance related to Laurentian failing to replace the 10 professors who have left the university since this spring.
Also in April, Laurentian announced it was cutting ties with the University of Sudbury, Huntington University and Thorneloe University.
A six-decade-old federation agreement with these universities, which operate on LU’s campus, allowed them to offer courses toward Laurentian degrees. However, Laurentian said it needed the tuition money that went to these universities for itself.
While Laurentian came to an agreement with Huntington, Thorneloe and the University of Sudbury fought the “disclaimer” of the federation agreement in court, but in the end, the courts allowed the agreement to be severed.
With the three formerly federated universities trying to figure out what’s next, their classrooms sat empty this fall.
The formerly federated university that has received the most press since the spring is the University of Sudbury.
With support from the francophone community, the University of Sudbury announced plans to become a French-language university, and demanded Laurentian transfer all of its French-language programs under its jurisdiction — so far, LU has refused.
The University of Sudbury has also transferred the intellectual property for its Indigenous Studies program to Kenjgewin Teg Educational Institute, an Aboriginal-owned and controlled post-secondary institution at M'Chigeeng First Nation.
Meanwhile, Laurentian’s restructuring has progressed, with several processes underway.
One of the major activities associated with the CCAA has been the filing of creditor claims against Laurentian.
We recently learned that close to 1,500 claims totalling around $360 million have been filed against LU by creditors. Those owed money by the university include past and present Laurentian employees.
Currently, the stay of proceedings protecting Laurentian from its creditors has been extended to Jan. 31, so a court hearing on the matter is expected early in the new year.
A plan of arrangement in which creditors would be paid out (employees expect to receive only a small portion of what they’re owed) has yet to be created.
However, Haché has acknowledged that Jan. 31 is not necessarily the date the university will emerge from the CCAA, with the process possibly stretching into the end of 2022.
The university has also engaged consultants Cushman & Wakefield to review its real estate holdings to see if any can be “monetized.”
The situation had many Sudburians worried that Laurentian may sell off some of the beloved campus greenspace to developers, and a campaign was launched to protect the area.
Haché told Sudbury.com in November that he would be surprised if “the greenspace became something other than greenspace,” due to zoning issues.
It’s expected that the report on Laurentian’s real estate holdings will be presented to the university’s board of governors in early 2022 (Haché told Sudbury.com the full report likely won’t be made public).
Laurentian has also engaged consultants Nous Group to conduct a governance and operational review of the school in the wake of its insolvency. Consultations were held this fall, and the university awaits the report, which will be made public.
Then there’s the issue of the well-publicized dispute between Laurentian and Ontario Auditor General Bonnie Lysyk.
Lysyk says Laurentian is refusing to provide her with privileged documents as she conducts a value-for-money audit of the university.
She was tasked with the value-for-money audit this past spring by the Ontario legislature’s Standing Committee of Public Accounts.
The matter was heard by the courts earlier this month, and Chief Justice Geoffrey Morawetz reserved his decision, which as of this article’s publication, has yet to be released.
The Ontario legislature also issued a rare Speaker’s warrant earlier last month at the behest of the Standing Committee of Public Accounts.
The Speaker’s warrant orders Laurentian president Robert Haché and Claude Lacroix, now the former president of the university’s board of governors, to release a long list of documents, including privileged documents, by Feb. 1.
Laurentian had offered to release some privileged documents to the legislature, but not everything that was asked for, a situation MPPs say is unacceptable.
“The very strong advice that we have received is if we get into the sharing of privilege within the CCAA process, the CCAA process will fail,” said Haché at the December Laurentian senate meeting.
On Christmas Eve day, we learned that Laurentian is asking the courts for a stay of the Speaker’s warrant that orders them to release the aforementioned documents.
The stay Laurentian is asking for is “pending a determination of whether their issuance fell within the scope and extent of the Legislative Assembly’s parliamentary privilege, or further order of the Court.”
Alternatively, Laurentian is asking for “advice and directions from the Court on how the University should comply with the Speaker’s warrants, given the existing court orders and the CCAA restructuring process.”
We also learned last month that the province was providing a financial package to LU.
The financial terms of the support from the province, announced Dec. 16, include $35 million to refinance the existing DIP (debtor-in-possession) financing made available within the CCAA proceeding.
The province also expressed an intention to replace the DIP Facility with a long-term loan upon Laurentian’s emergence from the CCAA process with a successful Plan of Arrangement, on terms to be agreed.
Other terms include up to $6 million in COVID-19 funding for the university, and enrolment corridor and performance protection of up to a combined amount of $22 million over a number of years.
There were strings attached to the provincial money, however,
In connection with the financial package from the province, 11 members of Laurentian’s board of governors resigned Dec. 15. That included chair Claude Lacroix and vice-chair Sonia Del Missier.
On Dec. 21, Laurentian announced five new board of governors members. These members are filling what’s known as “Lieutenant Governor in Council” positions (essentially provincial appointees), appointed to Laurentian’s board in accordance with the Laurentian University Act.
Speaking at the Dec. 22 board of governors meeting, Laurentian’s president gave his “heartfelt thanks” to the departing board members “for their unwavering commitment to the university in the face of tremendous adversity.
“They have worked tirelessly over the past year, and it is thanks to their passion and commitment that we are at the point we are at today,” Haché said.
Earlier in December, Haché, along with members of Laurentian’s senate, had expressed concern about the national press LU has received lately and the impact it will have on recruitment for fall 2022.
Toronto Star columnist Bob Hepburn actually named Laurentian as one of the “losers” of the year in his Dec. 15 column about the Top 10 Winners and Losers of 2021.
Laurentian has already seen 14-per-cent decrease in enrolment this fall as compared to a year ago as it continues to undergo insolvency restructuring.
However, Haché seemed more optimistic at the Dec. 22 board of governors meeting, referencing the provincial financial package for Laurentian.
“With this announcement, new applicants who may be considering Laurentian can feel even more confident to study in the North,” said Haché.
The Laurentian president added in his remarks that the university has been on a “difficult and necessary journey of transformational change.”
He thanked the university’s staff and faculty for their “commitment, patience and sacrifice … despite the uncertainty of this journey, and through a relentless pandemic, they remain focused on the success of our students.”
