Laurentian University files for protection from creditors
Sudbury school points to ‘unprecedented final challenges’ leading to decision
Laurentian University has taken the rare — and drastic — step of filing for creditor protection because of mounting financial woes that have been exacerbated by the COVID-19 pandemic.
In a message posted to the school’s website, president Robert Haché said “a number of developments over the past decade have put an increased strain on the operational and financial health” of the publicly supported university located in Sudbury.
“These strains include a combination of factors such as historical recurring deficits, declining demographics in northern Ontario, the closure of our Barrie campus in 2019 and the domestic tuition reduction and freeze that was implemented in 2019 and most recently various costs and revenue impacts due to the global pandemic.”
He said “as we have communicated previously, we are facing unprecedented financial challenges and our financial health is currently amongst the weakest in the province compared to other universities. We intend to change that.”
On Monday, Laurentian filed for court protection under the Companies’ Creditors Arrangement Act, or CCAA — used in the past by struggling businesses such as Air Canada — to give it time to restructure.
The university says it will be business as usual for students during the restructuring.
The situation prompted Colleges and Universities Minister Ross Romano to
appoint an adviser to guide the province on how to best support Laurentian, and also warn post-secondary institutions they may find themselves subject to increased financial oversight.
“It is deeply concerning that Laurentian University has found itself in a situation where such drastic and immediate action is needed to ensure its long-term sustainability,” said Romano.
“Laurentian University students remain the government’s priority and we are focused on ensuring they can continue their studies without interruption.”
Romano, who represents the riding of Sault Ste. Marie, said “this situation is unprecedented … The government wants to ensure this issue does not repeat itself in other institutions in the post-secondary educational sector.”
New Democrat MPP Laura Mae Lindo, her party’s postsecondary critic, and Sudbury MPP Jamie West slammed the government — and Romano — for not doing more to help Laurentian, which “has educated generations of Ontarians in every field, including in Indigenous and francophone studies, despite years of underfunding by successive Liberal and Conservative governments.”
They said “it’s appalling that Minister of Colleges and Universities Ross Romano — a northerner himself — chose to devalue their achievements, minimize the devastating impact of COVID-19, refuse to recognize decades of underfunding and respond to this distressing situation with a threat to put university finances under government oversight powers.”
Ontario universities are mainly funded through student tuition fees — especially those of international students — and grants from the provincial government, among others. Because they are considered autonomous, financial oversight by the province is not as stringent as that of public school boards or hospitals.
Bryan Gelman, a licensed insolvency trustee, said Laurentian has recorded “year-overyear losses for a significant number of years.”
He noted that the school went from $69.6 million in net assets in 2015 to $36.7 million in 2020, and that it currently has assets of $33.2 million, but liabilities of $43.7 million.
“The steady decline in net income has been exacerbated by COVID -19, which has really created a lot of uncertainty in the marketplace,” said Gelman, cofounder of Toronto’s Albert Gelman Inc.
He’s not involved in the process but read the filing.
“Irrespective of that, it looks like the university had a tremendous amount of debt before COVID — but clearly that was the straw that broke the camel’s back.”
In its court filing, Laurentian notes it is a bilingual institution that also provides comprehensive Indigenous programming. It has about 8,200 undergraduate students.
While enrolment is up slightly this year, that’s because of online learning.
The concern is the number of students coming to Laurentian straight out of high school, which has dropped 15 per cent from last year.
It has already frozen hiring, and delayed filling vacant positions, reduced contracts and trimmed operating expenses and brought in Ernst & Young as financial advisers, the filing says, though it struggles with “a large number of programs that have consistently low enrolment and are not financially sustainable.”
And COVID has meant residences that are just 30 per cent full, plus lost rental income for events and conferences as well as parking revenues.
Just last week, Romano pledged help for post-secondary institutions suffering because of COVID-19.
Charles Pascal, a professor at the University of Toronto’s Ontario Institute for Studies in Education, said he wondered if there had been any discussions with the province before the “unprecedented claim for bankruptcy.”
“There will be enormous pressure to figure out how to prevent permanent damage to a university that has done so much for so many,” said Pascal, a former college president, who has an honorary degree from Laurentian.
“There will be important lessons learned.”
A spokesperson for Romano said the issues with Laurentian “only recently came to light following in-depth reviews by external advisers hired by Laurentian to assess the situation.”
The spokesperson said “the ministry is remaining in constant contact with Laurentian as their situation evolves and as the government considers its options.”
He noted the government has provided post-secondary schools with $25 million for COVID efforts and $50 million for online learning.
But David Simao, chair of CUPE’s Ontario University Workers Coordinating Committee, blamed “massive” reductions in public funding that have left schools relying on tuition money and private donations to make up the difference.
“This is a wake-up call to both the federal and provincial government — we can’t let our students and educators fail by underfunding our cherished public institutions.”
“It is deeply concerning that Laurentian University has found itself in a situation where such drastic and immediate action is needed to ensure its long-term sustainability.”
ROSS ROMANO
COLLEGES AND UNIVERSITIES MINISTER