Sudbury

Judge seeks compromise for Laurentian creditors aiming for over $5M each

A judge overseeing insolvency proceedings at Laurentian University has come up with a tailor-made solution to the claims process after the northern Ontario school and one of its large claimants couldn’t agree on a path forward.

4 inspectors will be chosen to work with court monitor in claims process

A judge says insolvent Laurentian University is facing claims from banks around $130 million. The quantification and acceptance of claims is getting underway. (Erik White/CBC)

A judge overseeing insolvency proceedings at Laurentian University has come up with a tailor-made solution to the claims process after the northern Ontario school and one of its large creditors couldn't agree on a path forward.

The matter was argued on Friday before Superior Court Justice Geoffrey Morawetz.

Laurentian's lawyer, D.J. Miller, said the university needs to be finished with the Companies' Creditors Arrangement Act (CCAA) process by the end of December. The process has allowed Laurentian to continue to operate, under the insolvency process, while addressing its financial issues.

"That's the timeline all of the parties have been working toward, with all the efforts that have been made. And that is only going to be possible if the claims process that is put in place is one that is efficient that can be completed in a timely basis, that is not going to be bogged down or held back by additional elements being added."

TD wants monitor to consult with lenders

A court monitor (a judge) appointed by the firm Ernst and Young has been overseeing the proceedings, and Miller argues proceeding this way is the fairest and most efficient way to handle claims.

The additional elements she referred to were included in an amendment put forward by TD Bank, which proposed that the court-appointed monitor consult with the lenders and any other stakeholders on acceptance of claims over $5 million. 

TD Bank further proposed that if any stakeholder objects, the court monitor could apply to the court for a review of the acceptance.

The bank says it is owed about $30 million. RBC supported TD's amendment, saying it is owed about $90 million.

On behalf of Laurentian, Miller argued the process would hamper the monitor's ability to settle claims, and delay and complicate the proceedings.

Miller estimated there could be more than 15 claims over $5 million.

A lawyer for TD Bank, Stuart Brotman, argued while it's important to move quickly, the process must not be rushed and short timelines shouldn't interfere with a fair-claims procedure.

Worries about delaying process

In his ruling May 31 setting out a solution, Morawetz noted Laurentian's lawyer has always emphasized the need to move as quickly as possible for the school to remain open, and he was concerned TD Bank's proposal could delay the process.

Morawetz wrote that under TD Bank's proposal, seeking input from the sheer number of stakeholders on claims over $5 million could impede progress, but he wanted to ensure competing interests were balanced.

He said he's been persuaded the pre-filing lenders (the banks) should have some involvement in this process, but wants to avoid the "risk of being convoluted and cumbersome" to the point of not being able to complete the process in a timely manner.

Morawetz is calling for the selection of four inspectors, chosen by the court monitor, the banks, Laurentian and creditors with claims of over $5 million.

"Two of the 'inspectors' are to be representatives of the pre-filing lenders with the remaining two 'inspectors' being drawn from the group of creditors who file claims in excess of $5 million (a 'material claim')," he wrote.

"The monitor shall inform the 'inspector group' that they are to act in the best interests of all creditors, and that they stand in a fiduciary relationship to all creditors and should perform their duties impartially," wrote Morawetz.

The judge determined the monitor can change any claim with permission of three out of four inspectors. 

If the monitor does not receive authorization to compromise the claim, the monitor or any of the inspectors may apply to court within 10 days for review of the proposed acceptance, to ensure the concerns of the "pre-filing lenders" are addressed.

ABOUT THE AUTHOR

Kate Rutherford

Reporter/Editor

Kate Rutherford is a CBC newsreader and reporter in Sudbury. She reaches across northern Ontario to connect with people and their stories. She has worked as a journalist in Saint John, N.B and calls Halifax, N.S. home.

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