Laurentian University creditors vote in favor of a plan that allows the school to survive

Laurentian University’s creditors have voted in favor of a plan of arrangement that sets out the roadmap for the University of Sudbury, Ontario, to emerge from its insolvency proceedings, allowing it to continue operating.

For the vote to pass on Wednesday, the plan needed a majority of creditors to vote yes, and they had to represent two-thirds of the value of Laurentian’s claims.

The Laurentian University Faculty Association confirmed that 522 creditors voted in favor of the plan, representing 87.4% of eligible votes.

Creditors who voted in favor of the plan represented 68.9% of the total value of Laurentian’s receivables. To succeed, the plan needed at least 66.6% support.

This is breaking news. An earlier version of the story is below.

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The future of Laurentian University hangs in the balance with a vote later today.

Creditors of the University of Sudbury, Ontario, will vote on a plan of arrangement, one of the final stages of the insolvency proceedings that began in February 2021.

If the vote passes, creditors would get cents on every dollar and the university would pursue a plan to get out of its financial hole.

If that fails, Laurentian says it would shut down and liquidate its assets, including buildings on its campus.

“In the event of liquidation, students would be required to transfer to other universities and all faculty and staff would be laid off except for a small group retained for a period of time to help with student transitions, including including providing transcripts upon request, as well as assisting with asset maintenance,” Laurentian said in a website FAQ dedicated to its insolvency proceedings.

The university also said that in the event of liquidation, it would terminate its pension plan for staff and faculty members, which “would involve reduced pension benefits for many current and future retirees, in due to funding shortfall”.

What is a development plan?

The plan of arrangement means that Laurentian is approaching the final chapter of its insolvency proceedings under the Companies’ Creditors Arrangement Act (CCAA). It establishes the conditions between Laurentian and its creditors and describes the steps it will have to follow to rebuild itself after emerging from insolvency proceedings.

Fabrice Colin, president of the Laurentian University Faculty Association, said creditors can expect to get between 14% and 24% of the money owed to them under the terms of the plan.

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 troubles — listed more than 500 creditors.

They ranged from big banks like RBC, which owed more than $71 million, to local construction companies, government agencies and laid-off staff and faculty.

To pass, today’s (Wednesday) vote will require the backing of 51% of creditors, representing two-thirds of the money owed.

Colin said he was “cautiously optimistic” that creditors will vote in favor of the plan. The teachers’ association recommended that its members vote yes.

“If the plan is rejected, there is absolutely no guarantee that, for example, we will have a stronger bargaining 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 will simply be closed.”

If creditors vote to approve the plan, Laurentian will submit it for court approval on October 5. Once the courts approve it, the plan can be implemented.

Despite a tumultuous year, Laurentian continued to offer its remaining programs. In August, the university said it saw a 25% year-over-year increase in the number of confirmed students heading into the fall term.

Tom Fenske, president of the Laurentian University Staff Union, said he hopes the vote will pass. (Erik White/CBC)

An updated plan

Late last week, Laurentian’s administration tabled an amended plan that would see the payment period to claimants shortened from four to three years.

This is because the province and Laurentian have agreed to purchase the university’s assets in a shorter timeframe.

In May, the province announced it would purchase up to $53.5 million in real estate from Laurentian. Although she did not specify what real estate she would buy, that money would go to the university’s creditors.

The staff union has urged members who are eligible to vote today to vote in favor of the plan of arrangement.

“I think I would be lying to you if I said I wasn’t anxious,” Fenske said.

“The risk of a no is too great and we simply don’t see any evidence that there would be more money injected.”

But some fired faculty members think they could get a better plan if they vote against the current offer.

Eduardo Galiano-Riveros was a professor of physics at Laurentian but lost his job in April 2021 when the university cut 69 programs and laid off nearly 200 staff and faculty.

In April 2021, Laurentian University closed 69 programs and laid off nearly 200 staff and faculty members. (Erik White/CBC)

He now works at McMaster University in Hamilton and represents some of the 111 former Laurentian faculty members who lost their jobs last April.

“We are still advocating a no for the administration and the province to go back to the drawing board and come up with a fairer and fairer plan of arrangement that we as creditors might then be able to support,” Galiano – Riveros said.

Galiano-Riveros said he and some of his former colleagues don’t believe Laurentian will close unless the plan of arrangement is approved.

“Statistically and historically speaking, there have usually been a number of amendments for plans to pass and receive a positive vote,” he said.

But Laurentian maintains that there will be no second chances.

“If Laurentian cannot obtain the necessary support from its creditors affected by the plan, it will be unable to resolve and settle its substantial debts. Therefore, it is expected that the university will cease operations and begin 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 it might not matter in the end, for himself and other faculty members who have lost their jobs.

“At the moment, we are not looking after the interests of the university. We are no longer tied to the university,” he said.

“They kicked us out in a 15-minute Zoom meeting. What we’re looking for are our interests and those of all creditors.”

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