November 29, 2022

Donalds Hobby

World Finance Reviews

Laurentian plans to seek creditor protection extension beyond the end of this month

Several key upcoming court dates relating to LU’s insolvency were revealed at May 11 hearing, during which millions in consultants’ fees were also approved

Several key upcoming court dates related to Laurentian University’s insolvency were revealed during a May 11 hearing primarily focused on approving millions in consultants’ fees related to LU’s restructuring.

Speaking on behalf of Ernst & Young, the firm acting as the court-appointed monitor of Laurentian’s insolvency restructuring, Ashley Taylor said the matter related to the Art Gallery of Sudbury is scheduled to be heard on May 16.

Due to the history of the relationship between the Art Gallery of Sudbury and Laurentian, assets associated with the gallery have been caught up in the restructuring process under the Companies’ Creditors Arrangement Act (or CCAA).

Taylor also said a “stay extension motion” would be heard on May 30. The stay of proceedings protecting Laurentian University from its creditors currently expires May 31

Laurentian said in April it plans to file documents this month for a plan of arrangement to pay out its creditors so it can finally exit its insolvency restructuring.

Sudbury.com reached out to Laurentian to ask more about its plans to seek a stay extension motion. We received the following written response:

“The current period of the stay of proceedings in the CCAA proceeding expires on May 31,” the statement said.

“A further extension will be sought, as previously advised, to allow the process to proceed through the next steps including the presentation of a Plan of Arrangements to creditors and a vote by creditors which is a condition to successful emergence. Motion materials which provide details on the status of Laurentian’s restructuring will be available on or about May 23, 2022.”

Chief Justice Geoffrey Morawetz, who has presided over most matters related to LU’s insolvency, also told those attending the Wednesday hearing he plans to release a decision early next week related to a claim against Laurentian regarding a historic alleged sexual assault that’s also been caught up in the CCAA process.

The motion heard May 11 asked that millions in consultants’ fees incurred during 2021 as part of Laurentian’s insolvency restructuring be approved.

The court was also asked to approve activities undertaken by Ernst & Young last year while acting as the court-appointed monitor for the university.

Fees claimed by the monitor (Ernst & Young) during the period of Feb. 1 to Dec. 31, 2021 are $4.9 million, with disbursements of more than $54,000 (plus taxes of $646,431).

(Disbursements are out-of-pocket expenses incurred in addition to professional fees).

Accounting professionals with Ernst & Young who provided accounting assistance to Laurentian University in connection with its year-end financial statements are claiming fees in the amount of nearly $948,000, with disbursements of $119 (plus taxes of $123,242) for 2021.

Ernst & Young’s legal counsel, Stikeman Elliott LLP, is claiming fees of more than $2.7 million, with disbursements of $12,425 (plus taxes of $360,743) for the same time period.

Taylor said the role of the court on a motion relating to the accounts of a court-appointed monitor is to evaluate them “based on the overriding principle of reasonableness.”

The predominant consideration for assessing the reasonableness “is the overall value contributed by the monitor and its counsel.”

Taylor said case law shows that “it would be inappropriate to reduce the fees of court officers based on the suggestion that they are too high.”

He said these proceedings represent the first time in Canada that a publicly-funded educational institution has filed for creditor protection under the CCAA. 

“This restructuring has been highly scrutinized by Laurentian’s creditors, stakeholders, regulators, the government, special interest groups and the public from the outset,” Taylor said.

He said that at the time of the CCAA filing, Laurentian’s internal resources were already strained, and since the filing, Laurentian has lost several key personnel, leaving a large number of key administrative positions vacant.

“Together, this has negatively impacted the ability of the remaining Laurentian personnel to manage both their day-to-day ordinary course duties, as well as advancing many of the additional time intensive aspects of the CCAA proceeding,” Taylor said.

“This has resulted in the monitor taking on far more of the applicant’s day-to-day work than would typically be the case, including finance, accounting, labor relations issues, communications, and other matters. 

“It also led Laurentian’s board to ask Ernst and Young to provide accounting personnel to assist Laurentian’s finance team with the preparation of their annual financial statements, among other matters.”

Taylor said that Ernst & Young has also been involved in the mediation between Laurentian stakeholders, which resulted in massive program and employee cuts last year, which he said secured an annual cost savings of approximately $40 million.

He said Ernst & Young was also involved in the severing of the agreement with the federated universities operating on LU’s campus in 2021.

“These savings are significant and have created a cost structure that should be financially sustainable for Laurentian,” Taylor said.

He said that the monitor was also central to the claims process against Laurentian by its creditors.

“Over 200 proofs of claim were filed with an aggregate asserted about claim value in excess of $300 million,” Taylor said. “The process of reviewing, accepting, revising and disallowing claims is ongoing, but significant progress has been made.”

No other parties beyond Taylor made any submissions during the May 11 court date.

“I don’t see anybody wishing to take the floor, so I am prepared to grant the order today that will bear today’s date,” said Chief Justice Morawetz.

“I will provide some brief reasons, more or less along the lines of the law that you’ve set out in your factum, Mr. Taylor. Those should be available within a few days.”

Heidi Ulrichsen is the associate content editor at Sudbury.com. She also covers education and the arts scene.