Laurentian University's creditors vote in favour of plan that allows school's survival
Creditors expected to get between 14% and 24% of money they're owed from Sudbury, Ont., school
Laurentian University's creditors have voted in favour of a plan of arrangement that sets the roadmap for the Sudbury, Ont., university to exit its insolvency proceedings, allowing it to continue to operate.
For the vote to pass Wednesday, the plan needed a majority of creditors to vote yes, and they had to represent two-thirds of the value of the claims Laurentian owed.
The Laurentian University Faculty Association confirmed 522 creditors voted in favour of the plan, which represented 87.4 per cent of eligible votes.
The creditors who voted in favour of the plan represented 68.9 per cent of the value of the total claims Laurentian owed. To pass, the plan needed at least 66.6 per cent support.
What is a plan of arrangement?
The vote on a plan of arrangement is one of the last steps of the university's insolvency proceedings, under the Companies' Creditors Arrangement Act (CCAA), that started in February 2021.
The plan sets out the terms among Laurentian and its creditors, and outlines the steps it will need to take to rebuild as it exits insolvency.
Now that the vote has passed, creditors will get cents on the dollar, and the university will go ahead with a plan to pull itself out of its financial hole.
Had creditors voted no to the plan, Laurentian said it would have had to shutter its doors and liquidate its assets, including the buildings on its campus.
"In a liquidation, students would be required to transfer to other universities and all faculty and staff would be terminated, other than a small group retained for a period of time to assist with the transition of students, including the provision of transcripts upon request, as well as assisting with the maintenance of assets," Laurentian said in an FAQ from a website dedicated to its insolvency proceedings.
The university also said that in the event of liquidation, it would have had to wind up its pension plan for staff and faculty members, and that would "involve a reduction in pension benefits for many current and future retirees, as a result of the funding deficiency."
Fabrice Colin, president of the Laurentian University Faculty Association, said creditors can expect to get between 14 per cent and 24 per cent of the money they are owed based on the plan's terms.
Over 500 creditors listed
A court document filed in February 2021, when Laurentian filed for insolvency — which under the CCAA allowed it to operate while it dealt with its financial issues — listed more than 500 creditors.
They ranged from large banks like RBC, which was owed more than $71 million, to local construction companies, government agencies, and terminated staff and faculty members.
Ahead of the Wednesday vote, Colin said he was "cautiously optimistic" creditors would vote in favour of the plan. The faculty association recommended its members vote yes.
"If the plan is rejected, there is absolutely no guarantee that, for instance, we will have a stronger negotiating position or that the province will support the second round of negotiations," he said.
"And again, in addition, there is a risk that the university could just be shut down."
Now that creditors have approved the plan, Laurentian will present it for court approval on Oct. 5. Pending approval by the courts, the plan can be implemented.
Despite a tumultuous year, Laurentian has continued to offer its remaining programs. In August, the university said it had a 25 per cent year-over-year increase in confirmed students heading into the fall term.
An updated plan
Late last week, Laurentian's administration filed an amended plan that would see the payout period to claimants shorten from four to three years.
That's because the province and Laurentian have come to an agreement on the purchase of the university's assets in a shorter timeframe.
In May, the province said it would purchase up to $53.5 million worth of Laurentian's real estate. Although it hasn't said what real estate it would buy, that money would go to the university's creditors.
The Laurentian University Staff Union had recommended that members who were eligible vote in favour of the plan of arrangement.
"I think I would lie to you if I said I wasn't anxious," staff union president Tom Fenske said before the vote.
"The risk of a no vote is too great and we just don't see any evidence that there would be more money injected."
Some advocated for 'no' vote
But some terminated faculty members believed they could get a better plan if they voted no to the current offer.
Eduardo Galiano-Riveros was a Laurentian physics professor, but lost his job in April 2021, when the university cut 69 programs and fired nearly 200 staff and faculty members.
Now, he works at Hamilton's McMaster University and represents some of the 111 former Laurentian faculty members who lost their jobs last April.
"We are still advocating for a no vote so that the administration and the province will go back to the drawing board and come up with a fairer, more equitable plan of arrangement which then we as creditors might be in a position to support," Galiano-Riveros said prior to Wednesday's vote.
Galiano-Riveros said he, and some of his former colleagues, do not believe Laurentian would have shut down if the plan of arrangement hadn't been approved.
"Statistically and historically speaking, typically there have been a number of amendments for plans to be accepted and receiving a positive vote," he said.
But Laurentian argued there was not going to be a second chance.
"If Laurentian cannot obtain the necessary support of its affected creditors to the plan, it will be unable to resolve and settle its substantial debts. As a result, it is expected that the university will cease operating and will commence a liquidation process which would include a sale of all assets including all buildings and real estate," the university said in its online FAQ.
Galiano-Riveros said that might not matter in the end for himself and other faculty members who lost their jobs.
"Right now, we don't look out for the interests of the university. We're no longer connected to the university," he said.
"They kicked us out in a 15-minute Zoom meeting. What we are looking out for is our interests and those of all the creditors."