On Sept. 14, Laurentian University’s proposed plan to creditors was approved. While this is good news for the survival of the university, some are calling the plan a “poison pill.” Laurentian currently expects to emerge from the protection of the Companies’ Creditors Arrangement Act (CCAA) by the end of November.
For the plan to be approved, it needed a majority of votes cast. Those votes also had to represent two thirds of the total claims of the creditors who cast a ballot.
In total, 606 eligible creditors attended the vote in person or by proxy, according to a report produced by Ernst & Young, which acted as the restructuring monitor. The plan was approved with 522 of the 597 ballots cast (87.4 per cent).
The creditors present had a total of $178.9 million in claims, but not all voted. Several sources who were at the vote said that the largest creditor, the Royal Bank of Canada, which is owed $70 million, abstained. Consequently, the total value of voted claims was $62.9 million. The 522 creditors who voted in favour represented 68.9 per cent of that amount, just over the two-thirds threshold.
Emerging from creditor protection
On Oct. 6, the chief justice of Ontario’s Superior Court of Justice, Geoffrey B. Morawetz, approved the plan and the vote results. That same day, he granted another extension of CCAA protection for the university until Nov. 30 (the university initially asked for creditor protection in February 2021).
To exit creditor protection, Laurentian will have to meet several other conditions. Among the conditions, the institution must come to?? an agreement with the Government of Ontario for the sale of university-owned real estate with a maximum value of $53.5 million. The proceeds of the sale will be used to repay creditors, who can expect to receive between 14 and 24 per cent of what they are owed.
Then, on Oct. 31, Laurentian president Robert Haché announced that he would retire that same day. Tammy Eger, vice-president of research, has since taken over as interim president. This comes after the university revealed in July that both Dr. Haché and Marie Josée Berger, vice-president, academic, would retire before the end of the CCAA protection.
A “poison pill”
In April 2021, the university announced that several faculty and staff would lose their jobs. Like many others, Laurentian biology professor Albrecht I. Schulte-Hostedde was “very dismayed by the decisions made by the university administration and the board at the time,” he said in a recent interview with University Affairs. “I watched the university cut people and programs that I thought were important.”
While Dr. Schulte-Hostedde did not lose his position, he witnessed the university’s school of the environment disappear and a number of his colleagues, friends and collaborators lose their jobs. His workload immediately increased, a change that was accompanied by a five per cent salary cut.
As one of the many faculty members who voted on the proposed plan to creditors, he admits that the decision was not cut and dry. “It’s a poison pill in a lot of ways. The threat was that the university will close,” he recalled.
Economics professor David Leadbeater, one of nearly 100 professors let go in 2021, was on hand with many of his former colleagues to vote against the plan. “It was a major injustice to professors, the community and small businesses,” he said.
Dr. Leadbeater never believed the threat of closure was real. The university will survive, he said, “but at what cost?” He does not believe it will ever regain its former reputation or size.
Although Dr. Schulte-Hostedde is not disappointed that the plan was approved, he remains bitter. What he considers the “destruction” of the university had serious repercussions on northern Ontario and its residents. He hopes that some of the cancelled programs will return, but acknowledged that the “mountain seems insurmountable” at times.
“In the short term, I’d like to see some accountability. The story needs to be told about what happened and who did it. And there needs to be consequences for that,” he said.
Dr. Leadbeater would also like to see a public inquiry. He says he watched the story develop over several years. Initially, he noticed a decrease in recruiting and hiring. “The administration always implied we were growing. But on the inside, I saw faculty were not being replaced. Programs were not properly supported, especially in the faculty of arts,” he said.
Rethinking the model
Dr. Leadbeater believes that Laurentian’s financial failure proves that despite being increasingly adopted by governments and universities, the “neoliberal model of education and its focus on privatization and corporatization does not work in poorer and remote areas like northern Ontario.”
To resolve the problem, he thinks both the federal and provincial levels of government will have to increase postsecondary funding. He also believes that the needs of society and each region should be re-evaluated and competition between institutions minimized.
A first surplus
The lawyer representing Laurentian, D.J. Miller, said in court that the administration had succeeded in decreasing expenditures by $40 million. “This represents a 25 per cent reduction in expenses and puts Laurentian on more viable footing,” she said.
The university’s 2021-22 financial statements, tabled at its board of governors meeting on Oct. 21, confirm the lawyer’s assertion. The statements show a surplus of $16.8 million, compared to a deficit of $66.6 million for the 2020-21 fiscal year, which included $78.7 million in restructuring costs.
Student registrations dropped by 14 per cent, but registration revenue was only down about seven per cent, according to interim vice-president of finance and administration, Michel Piché. International student tuition fees helped to make up that difference.
While the university’s future is clearer than at the start of the process, Laurentian is not out of the woods yet. According to Ms. Miller, the university was $135 million behind on building maintenance when put under CCAA protection. Today, it would be closer to $200 million. In addition, implementing the recommendations of the operational and governance reports over the coming years could cost $30 million.