Protection file

Laurentian benefits from creditor protection until May 31, limited reprieve on President’s mandate

Chief Justice Geoffrey Morawetz issued two separate rulings regarding LU in the past day

A few decisions have been handed down by the courts over the past day regarding the ongoing insolvency restructuring of Laurentian University.

Laurentian declared insolvency and filed for creditor protection and judicially supervised restructuring under the Companies’ Creditors Arrangement Act (CCAA) nearly a year ago on February 1 2021.

Chief Justice Geoffrey Morawetz, the judge who has heard most of LU’s insolvency-related cases over the past year, issued his ruling Jan. 26 on Laurentian’s request to stay the president’s term. issued by the Legislative Assembly of Ontario last month.

The president’s mandate obliges Laurentian to produce a long list of confidential documents by February 1 or next Tuesday.

Morawetz denied Laurentian’s full stay request, but granted a limited stay with respect to certain documents related to LU’s insolvency restructuring that are covered by court orders.

This limited stay “is in effect pending a determination of whether the issuance of the President’s warrants” with respect to certain documents covered by court orders “falls within the scope and extent of the parliamentary privilege of the Legislative Assembly,” Morawetz’s decision said.

Additionally, on January 27, Laurentian was back in court with a trio of motions:

  • That the “suspension of proceedings” protecting it from its creditors be extended until May 31 (the previous deadline was January 31).
  • That the current $35 million debtor-in-possession (DIP) loan from a private lender be replaced with a loan from the province.
  • And that it be allowed to hire a consultant for a new strategic plan.

During the hearing, Morawetz approved Laurentian’s motion for these three claims.

President’s mandate

Morawetz said in his Jan. 26 ruling on the Speaker’s term that he agreed with the arguments of counsel for the Speaker of the Ontario Legislative Assembly and the Minister of the Attorney General that parliamentary privilege allows the Legislative Assembly to compel LU to disclose most of the documents requested.

However, as noted above, he was granted a limited stay with respect to certain documents covered by court orders related to LU’s insolvency restructuring.

These documents are those covered by a sealing order issued by the court on February 1, 2021 (exhibits to the affidavit in support of LU for its initial application under the CCAA), as well as documents related to a mediation order issued by the court on February 5, 2021 (regarding the CCAA mediation process with Judge Sean Dunphy).

“I have received no authority which supports the proposition that a pre-existing court order restricting the disclosure of specified information may be set aside by a

production request from the legislature,” Morawetz said.

He added that “whether the Legislative Assembly can compel the production of such information or whether it goes beyond the scope of parliamentary privilege is a serious question that has not been addressed in any reported decision.

“This is a fundamental question that affects the relationship between the three

branches of government – ​​the executive, the legislature and the judiciary”.

Morawetz said he had “no hesitation in concluding that the disclosure of the information referenced in the sealing order and the mediation order is likely to cause irreparable harm to LU.”

“The consequences of disclosing the information restricted by the sealing order and the

Mediation orders are important. The CCAA proceeding has been ongoing for a year and LU is in the process of developing its restructuring plan. Disclosure of the positions of the parties involved at this stage, including that of LU, would be problematic.

Morawetz said a hearing on the matter could be scheduled for February or March “and that there will only be a relatively short delay in the application of the president’s mandate pending the determination of the scope of the privilege. . This is a serious question that needs to be resolved before it becomes a moot point.

Creditor Protection Extended Through May 31 and Other LU Requests

As mentioned above, at the January 27 hearing, Chief Justice Morawetz approved Laurentian’s last three applications.

Laurentian had requested that the “stay of proceedings” protecting it from its creditors be extended until May 31, that the current $35 million debtor-in-possession (DIP) loan from a private lender be replaced by that of the province, and that it be authorized to hire a consultant for a new strategic plan.

However, during the proceedings, Morawetz said he would like to get an idea of ​​when Laurentian expects to be able to present a plan to its creditors on how they will be repaid (known as plan of arrangement).

“The filing is almost a year old,” Morawetz said. “It’s time to go out there and make a plan.”

Laurentian’s attorney, DJ Miller, said Laurentian expects to present a plan of arrangement during the current suspension period (before May 31).

Laurentian said it is seeking a stay of proceedings protecting it from its creditors until May 31, as it still has a number of restructuring-related processes that are ongoing.

These include upcoming reports by third-party consultants, including a real estate review, looking at properties that Laurentian can potentially sell, and an operational and governance review, looking at how the university will be run going forward.

“These are major undertakings and third-party reviews that have been undertaken and have been going on for some time – very, very detailed reviews,” Miller said during the January 27 hearing.

“And so we are happy to say that we are finally at the end of the processes involved in these aspects, the operational and governance reviews have been completed, the real estate review is a few days away from completion.

Regarding the processing of the approximately 1,500 claims worth $360 million filed against Laurentian by its creditors, Miller said the process has “advanced considerably” and only a few more are left. to deal with a handful of complex cases.

The university is also working on its audited financial statements alongside its external audit team from KPMG, with assistance from a team of accountants from Ernst & Young, the same company that acts as auditors appointed by the LU Insolvency Restructuring Court.

There was a delay in completing the financial statements due to the limited resources of Laurentian’s finance team. Miller said Laurentian’s resources “continue to be extremely thin and stretched by all the demands placed on it by the various parties.”

The replacement of the current $35 million DIP loan with a loan from the provincial government is part of a provincial financial package provided to the struggling university announced last month.

The Province’s replacement DIP facility will be used by Laurentian to repay the existing DIP lender and refinance the existing DIP facility (which has an interest rate of 8.5% – the Province loan has an interest rate much lower).

As one of the province’s mandates, there have been changes to Laurentian’s Board of Governors, which have included the resignation of some members, including former president Claude Lacroix, and the provincial appointments of some new members.

Miller said Laurentian was “obviously very pleased with this show of support” tied to the provincial financial support program.

“The financial components of the total package offered by the Province of Ontario total $63 million for the future,” she said.

The province also requires Laurentian to develop a long-term strategic plan with the assistance of an external third party.

Laurentian has sought court approval for the Monitor (Ernst & Young) and its Director of Redevelopment (or CRO, Lou Pagnutti) to “develop a process for engagement with potential independent third parties who may be qualified and capable of assist LU with the development of a strategic plan.

Miller said Ernst & Young and Pagnutti were brought in for this project so they wouldn’t waste time going through a public contracting process for a consultant.

She said the development of a strategic plan is a longer-term project that will not be completed under the current suspension of proceedings (in place until May 31) as part of the company’s restructuring. insolvency of Laurentian.

Reporting of restructuring costs

During the January 27 hearing, Danielle Stampley, an attorney for the Laurentian University Staff Union (LUSU), raised the union’s concern about the lack of detail related to millions in restructuring costs in the comptroller’s reports. LU’s insolvency restructuring.

She said people need to add up all these costs from report to report, rather than a running total being readily available in reports. Morawetz encouraged Stampley to bring those concerns to the monitor, Ernst & Young.

Information and Privacy Commissioner

Also at the January 27 hearing, counsel for the Information and Privacy Commissioner (IPC) of Ontario challenged Laurentian’s extension of the CCAA process with respect to relates to an order issued a year ago as part of LU’s insolvency restructuring.

This order grants Laurentian a reprieve from the obligation to respond to any access to information requests received by Laurentian while it is still in the process of insolvency restructuring.

IPC attorney Linda Chen said there were only four outstanding access to information requests regarding Laurentian, two filed before LU’s declaration of insolvency and two since.

“There has been a significant passage of time, and that this particular state was never intended to be indefinite, given that it was unprecedented in nature, and given the quasi-constitutional rights that are inherent in the law of the public, and presumed right of access to information contained in public institutions,” Chen said.

Chief Justice Morawetz questioned why Chen had not filed a written petition with the courts regarding the case. Chen said this was due to delays in receiving information from Laurentian about the number of outstanding freedom of information requests.

Morawetz requested that Chen file a motion with the courts if she wishes to pursue the IPC’s objection.

Laurentian lawyer DJ Miller says the low number of freedom of information requests and lack of complaints about them means there is no need to ‘change the status quo’ .