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Court approves Laurentian loan agreement with province

University will take until 2038 to pay off $35M loan on funds borrowed during insolvency

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 was approved by the courts Nov. 1.

Those bridge loans are also known as debtor-in-possession loans, or DIP loans for short. They were initially taken out with a private lender, but were transferred to the province earlier this year.

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 working towards the various conditions under the plan (of arrangement),” said Laurentian’s insolvency counsel, D.J. Miller.

“One of those key terms, obviously, is the obtaining of an exit financing facility, which allows Laurentian to repay in full the debt facility, that is currently fully drawn. 

“So the terms of an exit loan agreement had been negotiated with the Ministry of Colleges and Universities, which is the DIP lender, and will now be the exit lender.”

As previously reported, 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.

That interest rate is subject to a “cost of funds adjustment,” which is an increase or decrease to the base interest rate.

A court document said this is “solely based on any change in the province’s 15-year cost of funds as between the date of the Exit Financing Agreement and the Facility Advance Date.”

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.

Conditions attached to Laurentian’s loan include a lien on its property and periodically reporting to the province with respect to financial, operational, governance and other matters.

If you’re interested in the full terms of the loan with the province, they’re outlined in several publicly available court documents, including the 18th report of the monitor, which was published by the firm Ernst & Young Oct. 27.

Also at the Nov. 1 court date, the discharge of a grievance resolution officer which was appointed to resolve outstanding union grievances was approved.

Liz Pilon, legal counsel for Ernst & Young, which is the court-appointed monitor of Laurentian’s CCAA process, said the grievance officer “may need to help us with one last grievance before his work is done.”

But that work needs to be done as a condition of the implementation of the plan of arrangement, and the way the order is written, the grievance officer is to be discharged upon the implementation of Laurentian’s debt plan.

The counsel for Laurentian and for Ernst & Young were the only two people to make submissions during the Nov. 1 court date.

After asking if anyone else wished to speak, Chief Justice Geoffrey Morawetz said “you can take it that both orders are granted,” adding that he will issue brief written reasons on his ruling.