Laurentian University officials were questioned at a meeting last week as to why the university wouldn’t just immediately pay off loans taken out while under insolvency restructuring.
LU finally got back control over its own finances Nov. 28 after 22 months of court-supervised insolvency restructuring under the Companies’ Creditors Arrangement Act (or CCAA).
Michel Piché, Laurentian’s vice-president, finance and administration, gave a short financial update at the Dec. 2 board of governors meeting, including a cash flow summary from February 2021 through October 2022.
(You can view the written report starting on page 90 of this document).
During Laurentian’s insolvency, the university took out a $35 million bridge loan called a debtor-in-possession (or DIP) loan.
The loan was originally held by a private lender, but the DIP loan was taken on by the province last winter.
With the exit from the CCAA, that $35 million has been converted to a long-term loan with the province, to be paid off until the year 2038, in annual repayments of principal and interest.
This is not to be confused with the province’s agreement to purchase $53.5 million worth of Laurentian’s real estate so that LU can pay back its creditors at least a small percentage of what they’re owed.
“So at the end of Oct. 31, Laurentian had an operating cash balance of just over $87 million, but that included the $35 million DIP financing,” said Piché.
He added that Laurentian also has $22.8 million in segregated bank accounts that are restricted for specific expenditures and an endowment fund, which includes endowments that LU has to hand over to NOSM, that’s just over $59 million.
Dan Scott, the Laurentian senate representative to the board of governors, asked why LU wouldn’t just pay off its loans.
“So according to the cash flow summary, at the end of October, we had $87 million in operating cash,” Scott said.
“But we still have a $35 million DIP loan. So it seems like we are hoarding cash and paying interest on the loan. When are we planning on paying the loan off? Or why can't we just pay it off in full at this point?”
Piché explained that under the CCAA, Laurentian didn’t have much influence over how its cash flows were managed, including the DIP loan.
“With the financing of the exit loan agreement, even here we didn't have much negotiating power,” he said.
“We essentially had to follow the ministry's terms in terms of how this loan was going to be sort of costed and repaid over a 15-year period. So we do have a series of payments, principal and interest, that will serve to repay that loan over the next 15 years. And we don't really have any prepayment option at this time.”
Piché said after several years have passed, perhaps there will be some room for negotiation with the province on this matter.
That being said, Piché emphasized the importance of investing “those funds in a way that at least is going to allow us to generate some investment income to help offset the interest expense on that loan.”
Enrolment down 5.9 per cent over 2021, 20.5 per cent over 2020
Piché’s Dec. 2 financial update also included an enrolment update, a framework for financial planning in 2023 and 2024 and a five-year financial projection.
In terms of enrolment, Piché said Laurentian has 5,640 full-time equivalent (FTE) students this fall, which is a reduction of 5.9 per cent over fall 2021, when there was 5,996 FTE students, and 7,090 in fall 2020, which is a reduction of 20.5 per cent.
However, Piché said Laurentian is “tracking favourably” this fall in terms of its enrolment predictions. Financial plan estimates for 2022-2023 were very conservative and included a 20-per-cent reduction on all new incoming cohorts.
Areas where Laurentian exceeded its target significantly include undergraduate fully online degrees (139 FTE over planned) and the new incoming cohort of graduate international students (93 FTE over planned).
Five-year financial projection, and ‘transformation plan’ money
In the five-year financial projection, there’s a projected operational surplus of $31.4 million in 2022-23, $19.9 million in 2023-24, $15.4 million in 2024-25, $13.8 million in 2025-26 and $12 million in 2026-27.
In looking at these projections, Dan Scott asked Piché about money earmarked for a “transformation plan,” which is $500,000 in the current financial year, but $7.2 million in each year thereafter, until 2026-27.
“I'm not familiar with what is involved in that transformation plan,” Scott said. “It’s a large amount. Could someone unpack that a little bit for us?”
Piché said the amounts listed under this category come out of the work of consultants Nous Group, who put out a report this past winter, making recommendations to transform Laurentian’s operations and governance.
He said this is more of a “placeholder number” at the moment, “to make sure that we allocate sufficient resources to be able to fund the transformation that's coming to us in the coming years.”
Hiring at Laurentian University
Laurentian University Staff Union (or LUSU) president Tom Fenske pointed out a section of the financial projections that shows salaries and benefits going up from $80.1 million in the 2022-22 financial year to $86.8 million in the current fiscal year, and rising to $98.4 million in 2026-27.
He wondered what that meant in terms of hiring faculty and staff. Beyond the mass layoffs in the spring of 2021, several faculty members have left Laurentian since that time, and have not been replaced.
Céline Larivière, who stepped in as LU’s interim provost last month, but until recently was the dean of the faculty of education and health, said there have been a lot of conversations between the former provost and the various deans on this issue.
Those conversations were around “identifying those very critical areas that require faculty hires. And so we do have a tentative plan which we're going to share with our labor partners and hopefully we can move forward early in the new year to action that process of hiring.”
Fenske cautioned LU’s leadership to conduct these conversations in an open and transparent way, as “I’m sure everybody in every department on this campus will make a very strong argument for that renewal.
“What you don't want to do is throw in some juicy meat in the middle of a pile of very, very hungry wolves, right?” he said.
The subject of possibly reinstating some of the programs cut at Laurentian in 2021 also came up at the meeting.
“In the auditor general's report, she did cite that there were programs that were financially viable that were cut, specifically remember the environmental program and midwifery,” said Shannon Bassett, who is also a LU senate representative on the board of governors.
“And so my question is, and also perhaps imploring a fast track, to look at ways of reconstituting those programs. I know in the environmental program, there's a lot of the professors there, they just don't don't have the program.”
Board chair Jeff Bangs said “I hope everyone will appreciate that I or the board can't today say definitively that a certain program will come back or it won't.
“What you have is our commitment to is accelerating the process to examine what is necessary and what our criteria are going to bring back or to reinforce or to to develop new programs for the future. And so we're working on that.”
Heidi Ulrichsen is Sudbury.com’s associate content editor. She also covers education and the arts scene.