Laurentian University goes before the courts once again Jan. 27 to make a trio of requests as it continues to restructure its operations under federal insolvency legislation.
Nearly one year ago, on Feb. 1, 2021, Laurentian announced it was insolvent, and was filing for creditor protection and insolvency restructuring under the Companies’ Creditors Arrangement Act (CCAA), something unheard of in the post-secondary sector.
As previously reported, Laurentian is now asking for a stay of proceedings protecting it from its creditors to be extended until May 31 of this year (the current stay of proceedings deadline is Jan. 31).
It is also asking that its current $35 million debtor-in-possession (DIP) loan taken out since the university declared insolvency on Feb. 1 of last year be replaced with a DIP loan with the provincial government.
In the same court document, the university asks that Laurentian’s chief redevelopment officer identify a third-party consultant to assist Laurentian with the development of a strategic plan.
Extending stay of proceedings until May 31
In terms of the stay of proceedings, a motion put forward by Laurentian said the university has “worked closely” with Ernst & Young, the firm acting as the court-appointed monitor of its insolvency restructuring, “to advance the restructuring.”
The stay extension, court documents filed by Laurentian explain, is required to enable the university “to continue operating in the ordinary course while continuing to implement a restructuring leading to a Plan of Arrangement,” in which creditors would be paid out.
The document said a cash flow forecast prepared by Laurentian with the assistance of the monitor demonstrates the university will have sufficient liquidity to operate its business and meet its obligations during the proposed stay period.
“The Applicant has acted, and continues to act, in good faith and with due diligence during the course of this CCAA proceeding,” said the document.
In an affidavit included as part of the latest package of court documents, Laurentian president Robert Haché said that in the affidavit he filed last August, he set out Laurentian’s expectations for certain steps that would be taken “based on information available at that time.”
While Laurentian has been working “diligently to advance this restructuring” some of those timelines were “optimistic and have necessarily shifted,” said Haché.
“Since August, there have been many intervening events that created a further strain on LU’s resources and the speed with which various aspects have progressed,” he said.
He names several key events that have “pushed out certain timelines leading to the development of a plan or compromise or arrangement.”
Those include the initial phase of the operational and governance review procurement process being unsuccessful “and delaying the ultimate engagement of an advisor to undertake those reviews.”
He said there have also been “delays experienced in completing the real estate review, which will inform discussions with creditors.”
There has also been a “delay in completing LU’s audited financial statements due to the strained resources of LU’s finance team and the extensive work required to review and reconcile all aspects, which has also delayed the preparation of refreshed financial projections.”
Haché also points to “the complexity of claims filed in the Claims Process” requiring “a very extensive factual and legal review by the Monitor and LU, with challenges relating to the gathering of certain information.”
Another factor has been the “value-for-money audit by the Auditor General and the involvement by the Standing Committee on Public Accounts, which has required LU personnel to locate, collect and coordinate the delivery of information and documents to satisfy information requests and provide regular updates to the advisors and the Board.”
Finally, Haché said “the onset of the Delta and Omicron variants of COVID-19” has been a factor, “which has disrupted operations on LU’s campus at various times and requires key senior leaders at LU to become diverted from other work streams in order to address the immediate health and safety needs of the students and staff on campus.”
“Notwithstanding the above, significant progress has been made by LU since August, as discussed in this affidavit,” Haché said.
Replacement of DIP loan by province
The replacement of the current $35 million DIP loan with one from the provincial government is part of a provincial financial package to the ailing university announced last month.
Court documents filed this week include the full terms of the new DIP loan with the province (if you’re interested in reading it, go to page 101 of this court document).
The replacement DIP facility from the province will be used by Laurentian to repay the existing DIP lender, and refinance the existing DIP facility.
The province has also “expressed the intention of converting the replacement DIP facility into a long-term loan upon the applicant’s successful emergence from the CCAA proceeding,” said the court documents.
This DIP loan agreement interest rate will be based on the “province’s one-year cost of funds at the time of the advance.”
For reference only, as of Jan. 12, that rate is 1.052 per cent, which “represents a significant cost savings that will benefit LU and its creditors when compared to the 8.5 per cent interest rate of the existing DIP facility,” said the court document.
The proposed DIP loan agreement with the province “extends similar protections and rights” as those granted to the existing DIP lender.
As part of the provincial support package announced last month, there have been changes to Laurentian’s board of governors, which has included the resignation of some members, including former chair Claude Lacroix, and the provincial appointments of some new members.
The changes to Laurentian’s board of governors are written right into the new DIP agreement with Laurentian as one of the terms.
The loan agreement says: “The DIP lender shall be satisfied in its sole discretion with changes to the composition of the board of governors of the borrower undertaken prior to the date of the advance.”
Regarding the “repayment and maturity date” of the DIP loan, all money owing to the lender (in this case, the province), are payable in full Sept. 30 of this year.
That’s unless one of a number of other things happen earlier, including the “implementation of a CCAA plan,” the completion of the sale of “all or substantially all of the assets and property of the borrower,” the stay of proceedings expires without being extended, or a default of the loan.
Developing a new strategic plan
Also as one of the conditions of the provincial financial support package announced last month, the province is requiring that Laurentian develop a long-term strategic plan with the assistance of an external third party.
Laurentian is seeking approval from the courts for the monitor (Ernst & Young) and its chief redevelopment officer (or CRO, Lou Pagnutti) “to develop a process for the engagement with independent, prospective third parties who may be qualified and able to assist LU with the development of a strategic plan.”
“In (Laurentian’s) view, the identification of qualified third parties by the Monitor and the CRO will assist in ensuring that the process of developing a long-term strategic plan can proceed effectively, efficiently, and expeditiously, to the benefit of LU and its stakeholders,” said the court document.
Laurentian University’s current strategic plan, which was released in 2018 with much fanfare, is set to expire next year, in 2023.
Last April, not long after Laurentian announced massive cuts to its staff and programs, Laurentian president Robert Haché was blasted by Linda Ambrose, a full professor of history at the university who led development of the 2018-23 strategic plan.
“By invoking the CCAA process, the president and provost have struck a death blow to the collective hopes and dreams that (strategic) plan articulates,” said Ambrose back in April 2021.
“What they destroyed with the plan, they rebuilt with their own plan two weeks ago, and it does not match our collective strategy, and what we articulated.”
