Court approves Laurentian loan agreement with province

University will take until 2038 to repay $35 million loan from funds borrowed during insolvency

A long-term loan agreement between Laurentian University and the provincial government to replace $35 million in bridge loans taken out by LU during its insolvency was approved by the courts on November 1.

These bridge loans are also known as debtor-in-possession loans, or DIP loans for short. They were initially contracted through a private lender, but transferred to the province earlier this year.

In early 2021, Laurentian declared insolvency and filed for creditor protection under the Companies’ Creditors Arrangement Act (CCAA), making widespread cuts to its programs and employees in April of the same year.

The university hopes to emerge from the CCAA in November after creditors vote in favor of a debt plan.

Also known as the plan of arrangement, the debt plan has several conditions for its implementation, including the establishment of exit financing for the $35 million long-term loan with the province. .

“Laurentian is working on the various terms of the plan (of arrangement),” said Laurentian insolvency lawyer DJ Miller.

“One of those key terms, of course, is obtaining an exit financing facility, which allows Laurentian to fully repay the credit facility, which is currently fully drawn.

“So the terms of an exit loan agreement had been negotiated with the Department of Colleges and Universities, which is the DIP lender, and will now be the exit lender.”

As previously indicated, the loan agreement provides that Laurentian will repay what it owes by April 30, 2038, in annual installments of principal and interest, at an annual interest rate equal to 6.106%.

This interest rate is subject to a “cost of funds adjustment”, which is an increase or decrease in the base interest rate.

A court document said this is “solely based on any change in the province’s cost of funds over 15 years between the date of the exit funding agreement and the date of the facility advance.”

The amortization schedule would see Laurentian repay $591,693 in principal and $884,115 in interest as of April 30, 2023. You can view the full amortization schedule on page 80 of this court document.

Conditions attached to Laurentian’s loan include a lien on its property and periodic reporting to the province on financial, operational, governance and other matters.

If you’re interested in the full terms of the loan with the province, they’re outlined in several publicly available court documents, including the Monitor’s 18th Report, which was released by Ernst & Young on October 27.

Also on the November 1 hearing date, the release of a grievance officer who had been appointed to resolve outstanding union grievances was approved.

Liz Pilon, legal counsel for Ernst & Young, which is the court-appointed monitor of Laurentian’s CCAA process, said the grievance officer “may need to help us with one final grievance before his work is not finished”.

But this work must be done as a condition of the implementation of the plan of arrangement, and the way the order is written, the grievance officer must be released during the implementation of the debt plan of the Laurentian.

Lawyers for Laurentian and Ernst & Young were the only two people to make submissions at the Nov. 1 court date.

After asking if anyone else wanted to speak, Chief Justice Geoffrey Morawetz said “you can consider both orders granted,” adding that he will issue brief written reasons for his decision.


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