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Secret Romano Laurentian University letter finally unveiled

Letters between LU and province show negotiations between two parties in the days leading up to Laurentian’s CCAA filing
20220304 Ross Romano KA 01
Ross Romano was the minister of Colleges and Universities.

The public is finally getting a look at letters exchanged between Laurentian University and the Ministry of Colleges and Universities from January 2021, in the days leading up to when LU declared insolvency and filed for creditor protection under the Companies’ Creditors Arrangement Act (CCAA).

These documents, referred to as “Confidential Exhibit EEE” and “Confidential Exhibit FFF,” were sealed from the public record at the beginning of Laurentian’s insolvency. 

At a Feb. 10, 2021 hearing, Laurentian lawyer D.J. Miller said that the sealed documents were “not something that should be disclosed on the eve of mediation, or at all, in our view.”

“It is something that reflects the commercial position of the university and the reality of the financial circumstances in which it finds itself,” Miller said.

However, Laurentian agreed earlier this fall that the public would have access to the documents as of its exit from the CCAA process, which finally happened Nov. 28, after 22 months under creditor protection.

Confidential Exhibit EEE is a letter from Ross Romano, then the minister of Colleges and Universities, to then Laurentian president Dr. Robert Haché, dated Jan. 21, 2021. Confidential Exhibit FFF is a letter from Haché to Romano, dated Jan. 25, 2021. 

As a side note, Haché and Romano have both left these roles, with Romano having been shuffled out of the Ministry of Colleges and Universities cabinet position in June 2021, and Haché parting ways with the university earlier this month as part of LU’s debt plan.

Laurentian would go on to file under the CCAA on Feb. 1, 2021.

Some of what is outlined in the documents has already been revealed by Ontario Auditor General Bonnie Lysyk in her recent report on Laurentian, especially regarding Laurentian’s financial demands of the province.

It’s interesting to note that Haché’s letter speaks about plans for massive staff and program cuts at Laurentian, months before they actually happened in April 2021.

For example, he said that “obligations for termination and severance pay, which are calculated to be approximately $48 million under the terms of the collective agreement where 100 full-time faculty are terminated, cannot be assumed by Laurentian University given its insolvency and inability to meet existing obligations.”

This has drawn the ire of the Laurentian University Faculty Association (or LUFA), who put out a press release upon the release of the sealed documents Nov. 28.

“These documents are shocking in the detail they provide about Laurentian’s secret longstanding plans to gut the university by terminating over 100 faculty and slashing dozens of programs,” said LUFA president Fabrice Colin, in the press release.

“Further, this correspondence reveals the Ford government knew the university was in financial difficulties and planning cuts at least six months before the CCAA was triggered. This raises serious concerns about why this government did not do more.”

Haché’s letter also includes a timeline of interactions between Laurentian and the Ministry of Colleges and Universities, and shows there was a meeting between LU officials and Romano about the possibility of a CCAA filing on Aug. 4, 2020.

The Jan. 21 letter from Romano references a $100-million ask by Laurentian to address its financial problems.

Romano said “at this point in time” the province is “not in a position to provide support on the order of magnitude of $100 million as requested in your presentation.”

The politician speaks about appointing a special advisor to provide advice and recommendations to the Minister of Colleges and Universities with respect to the current financial state of Laurentian University.

He said “in recognition of the immediate cash flow challenges facing Laurentian University,” the ministry had approved a grant of up to $12 million for the period ending March 31, 2021. 

“Approximately $6.1 million of the grant is proposed to be flowed upon signing of the agreement,” said Romano’s letter. “A further amount of up to $5.9 million will be released as further due diligence on the financial situation is undertaken.”

The grant would be conditional “upon Laurentian’s agreement to support and collaborate with the Special Advisor’s review as well as Laurentian’s agreement to not file for protection under the Companies’ Creditors Arrangement Act.”

However, in his Jan. 25 letter, Haché turned down the ministry’s offer.

“Unless a very different option arises over the next five days, we believe that the commencement of a CCAA proceeding currently represents the best path forward for Laurentian University,” he said.

Haché said the university assumed the $12 million referred to in the ministry proposal is based on a cash-flow proposal provided to the ministry. 

He said that cash-flow forecast was prepared in contemplation of a CCAA filing, meaning LU would have to make no payments in respect of existing indebtedness.

Haché’s letter also talks about the importance of the court-ordered protection for Laurentian and its board that the stay of proceedings under the CCAA offered. 

“In the absence of a CCAA filing, the University and the Board would have no protection for those liabilities, some of which includes potential personal liability for the members of the Board,” the letter said.

“Those include liability for wages (including those that accrue and are carried forward to the next month and not paid), vacation pay and source deductions to name a few.”

Haché said the ministry’s proposal “does not appear to consider the additional cash requirements, increased risk and personal exposure that arises after Feb. 1, 2021 if a CCAA proceeding is not commenced.”

“During our meeting with MCU representatives on Jan. 21, 2021 when the terms of the MCU Proposal were outlined and referred to as final, we asked if MCU was prepared to provide some form of protection or indemnity to Board members for the increased liability that they would be exposed to, if the MCU Proposal was accepted and a CCAA proceeding was therefore not commenced. The response we received was that this would not be provided.”

He also talks about the status of bargaining with the faculty association (LUFA), saying that the union might have ended up on strike in the winter of 2021.

“If certain steps are taken by LUFA (such as a strike, a Labour Board ruling or a process to require that the financial exigency provisions of the collective agreement be invoked) those events are incapable of being reversed at a later date by a CCAA court,” said Haché.

“A delay of two months could therefore create irreparable harm for Laurentian University’s efforts to effect a restructuring. Obtaining the protection of the Court through a CCAA proceeding prior to any of those actions being taken is critically important. Laurentian University simply does not have the ability to withstand a strike, and this would also create the most disruptive outcome for our students.”

Haché said the $100-million ask of the province was not a one-time or immediate request for funding.

He said half would be required over a period of two to three years to cover termination and severance pay if 100 faculty were fired, as well as cash for operations and to cover deficits over two or more years while other measures were being implemented.

“We also indicated by way of our discussions that $100 million would not be sufficient to address all financial issues that currently exist, if a restructuring was done outside of a CCAA proceeding without the ability to make changes more quickly and in the absence of any mechanism to compromise existing obligations,” Haché said.

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

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