Laurentian University president Robert Haché got into the weeds of the restructuring process at the university during the March 16 LU Senate meeting.
And he made one thing clear: if mediation with the Senate and other interested parties is not successful, and restructuring plans are not approved, “the university will cease to function as of April 30.”
The university revealed Feb. 1 it is insolvent and had applied for restructuring under the Companies’ Creditors Arrangement Act (CCAA).
As part of the CCAA proceedings, representatives of various stakeholders, including six representatives of the Laurentian Senate, were tasked with taking part in the mediation process where the restructuring process is being worked out.
The deadline for that process is April 30.
Laurentian University governs itself with a bi-cameral governance structure, as set out in the Laurentian Act. The Board of Governors has authority for business governance and the Senate has authority for academic governance.
Senators concerned by tight CCAA timeline
At their March 16 meeting, a few Laurentian Senate members expressed their displeasure with the tight CCAA timelines, saying they are concerned they are basically expected to rubber-stamp the plan, and that’s not what they thought the process would be.
Senator Ali Reguigui, a professor in Laurentian’s Département d'études françaises, put forward a motion asking that the Senators elected to take part in the CCAA process report back to the body no later than March 31.
This would be “so that the Senate would have time to consult with faculty members and to discuss the proposals and amend them, if necessary.”
However, the motion was declared out of order by Laurentian Senate speaker Christine Lalonde, saying that as the CCAA mediation process will still be underway as of March 31, any information would be under strict confidentiality.
During the question period following Haché’s report, Senator Christina McMillan-Boyles, a professor in Laurentian’s school of nursing, asked if it was simply a case of the Senate being presented with recommendations, and being asked to endorse them.
She wondered if there would be a process of the recommendations possibly being sent back if they are not endorsed, or if time would allow for that.
“GIven the timelines, while this is speculation, it is mild speculation that there will not be very much time for any back and forth between members of the Senate and the mediation table,” Haché said.
“There will be time for a fulsome presentation, hopefully a fulsome discussion, and the consequences of the endorsement and not endorsement of the Senate I think will be made entirely clear. I will be even more clear than what you alluded to. If we are not successful in mediation with all the different parties, including the Senate, if the recommendation to the Senate is turned down, the university will cease to function as of April 30.
“It is not an if, and, or maybe," Haché continued. "That’s when the money runs out. We just need to understand that. I don’t like to say this. I truly believe that we will come together as a community and find a solution that moves us forward.”
Restructuring’s second phase begins May 1
Haché said Laurentian is limited to three months in which to come up with restructuring plans because it received a Debtor In Possession (DIP) loan of $25 million, which only covers LU’s expenses until April 30.
“You would say the list is $650 million worth of real estate at the university — how can that be only worth $25 million as security?” he said. “The answer is a university campus is purpose-built. You can’t really do much with a university campus other than run a university.
“And so while there is hundreds of millions of dollars in infrastructure at the university, at the end of the day, when you’re looking at a lender that is providing short-term support for the university, they are concerned and deal with saleable assets.”
Laurentian is currently in the first phase of the restructuring process, which, as mentioned above, involves interested stakeholders coming up with a plan.
Haché said in his written report to the Senate that mediation is ongoing, and participants are unable to comment on specific progress being made due to court-imposed confidentiality with respect to the mediation.
However, as part of the critical milestones of the first phase of Laurentian’s restructuring, the Senate can expect a report back by its elected representatives during the month of April.
Haché said in a written statement earlier this month that the university is hopeful that by April 15, “the community will start to see emerging clarity around key issues such as how Laurentian’s academic offerings and federation agreement will be structured in the fall of 2021.”
Provided Laurentian and the mediation parties are able to satisfy the critical milestones in the first phase of its restructuring, May 1 will mark the start of the second phase of the CCAA process.
That will involve obtaining further interim financing from the CCAA lender and an extension of the stay of proceedings (preventing creditors from taking action).
In this phase, Laurentian anticipates that certain operational restructuring steps will be undertaken.
“With additional interim financing, we will begin certain aspects of the operational restructuring,” Haché told members of the Senate.
“As much as can be done will be done and implemented over the summer, including the restructuring of the academic programs, so that we have a suite of offerings in the fall.”
It is also at this juncture that Laurentian will undertake a formal process to receive and assess creditor claims, and engage in discussions with a broader group of stakeholders with a view to developing the framework for a formal ‘Plan of Arrangement’ that will outline the terms of its emergence from CCAA protection, progressing towards financial sustainability.
Phase 3 could include asset sales
If the above steps occur, then Laurentian anticipates that as the fall 2021 term commences in September, so too will begin a third phase of the CCAA process, reflected by the full implementation of the change to Laurentian’s academic programming and operational structure.
”In Phase 3 in the fall is the implementation, including how we are going to pay our creditors,” Haché said.
“That could include, as I think somebody raised in conversation, the sale of assets at the university. Because we are going to have to have a plan that people are going to have to accept to allow us to go forward.”
The university president emphasized for Senators the “dire nature of the university from a financial perspective.
“We have to get this fixed, we have to get it fixed fast,” he said. “There simply is unfortunately no alternative, as I think every member of the community now understands.
“There’s nobody out there with a big cheque for us. We need to be fixing the structural issues that have gone on for years and years and years.”