SUDBURY

Laurentian created a 'manufactured crisis' to cut ties with 3 schools for $10M loan, court told

CBC/Radio-Canada 
29/4/2021

© Yvon Theriault/Radio-Canada Laurentian University has been going though unprecedented restructuring in the wake of declaring financial insolvency on Feb. 1. The Sudbury, Ont. school is currently under creditor protection, and was in Ontario…

Laurentian University's attempts to cut ties with three federated schools, as part of efforts to qualify for a $10-million loan to help it continue with restructuring for survival, was met with heated opposition in Ontario Superior Court on Thursday.

Laurentian lawyer D.J. Miller argued the Sudbury, Ont., university wouldn't' be sustainable without the loan, so needs to end contracts with Thorneloe University, the University of Sudbury and Huntington University, including to keep $7.7 million in grants and funding that would normally flow to those partners.

Miller also told Justice Geoffrey Morawetz that Laurentian severing its relationship with the three other universities is a requirement of getting approved for the loan from Firm Capital Mortgage Fund Inc.

Laurentian "cannot put forward a viable plan if it does not have the ability to stop the flow of money from Laurentian to the federated universities," she said.

The university needs the court's approval to move forward with restructuring. The hearing is the latest move in its ongoing attempts to operate while trying to gain financial stability as part of the insolvency process under the Companies' Creditors Arrangement Act (CCAA).

Earlier this month, the school started making deep cuts to staff and programs, prompting outcry from students, staff and supporters, and calls for governments to step in. The federated universities, in turn, launched court challenges after Laurentian announced cutting ties with them would be an important part of becoming financially viable again.

Schools say cost to cut ties overblown

Thorneloe and the University of Sudbury, however, say there's no cost to Laurentian to maintain ties with them, and ending the federated agreements would drive Thorneloe, at least, into its own financial crisis.

For its part, Huntington has reached an agreement to sell its online gerontology program to Laurentian and cease offering courses.

But during Thursday's court proceedings, it was revealed that if the other two universities win their court challenges, Huntington would also benefit and retain its federated status.

Andrew Hatnay, lawyer representing Thorneloe, accused Laurentian of just "plain mismanagement," saying it would only retain $1.8 million from ending its agreement with Thorneloe alone.

Hatnay argued Laurentian is exploiting the restructuring process, saying it simply wants to stop students from taking Thorneloe courses and direct them to Laurentian to lessen competition.

He said Laurentian's claim it needs a loan quickly, by the April 30 deadline, is a "manufactured crisis," and he accused Laurentian of deploying "tactics" to reach its financial goals.

Laurentian lawyer deflects competition idea

Miller said cutting personnel and programs were only part of the initial attempts to show how Laurentian would immediately reduce costs. She said the lending condition that the federated partners be severed was added April 19, after time was spent trying to negotiate a consensual agreement with them.

She dismissed the argument Laurentian simply wants to reduce competition.

"Evidence is clear, and the testimony of [Laurentian] president Robert Haché has been abundantly clear, that to suggest that Thorneloe and Laurentian are in competition is to suggest that a store that sells computers down the road is in competition with Dell," she said.

"This is not about eliminating the competition. There are three service providers here moving to one service provider which will provide service to all students."

Miller said Laurentian plans to use its own faculty and facilities, so isn't in need of support from the other schools.

If the federated universities win court challenges to stop the split, it would lead to Laurentian's demise, she said.

The University of Sudbury's case against Laurentian's separation plan is scheduled to be heard by another judge on Friday.

Laurentian wants to continue to be protected from creditors so it can apply for the $10 million, which would allow it to still operate while restructuring, and needs court approval for certain conditions to qualify for the loan — most importantly getting the OK to split with the three federated universities.

Miller said getting the $10-million loan would allow it to deal with creditors, and teach spring courses as well as six Indigenous studies courses.

As well, she said, Laurentian would be able to meet the terms it agreed on with Huntington University, including paying $1.2 million into a pension plan and Laurentian would acquire Huntington's gerontology program.

Lender has 'a lot of skin in the game'

Vern Da Re, representing Firm Capital Mortgage Fund in court, confirmed the lender's condition that Laurentian end its agreements with the federated universities to qualify for loan money on top of the $25 million it already lent to Laurentian.

"I don't think my client should be forced to advance $10 million — that would have a chilling effect on further loans," Da Re said.

He said his client simply wants to know his loan will be repaid, and emphasized these are all business decisions.

"We've got a lot of skin in the game."

Morawetz expressed frustration that he was being asked to make a critical decision within a short amount of time.

"Could this timing crisis not been averted with actions entirely within the power of the applicant?" the judge asked.

But Morawetz said he and the judge in the University of Sudbury hearing will deliver written decisions sometime before 11 p.m. ET on Sunday.

Classes for Laurentian's spring term start May 3.