More than $38M in LU scholarship, bursary donations is gone, court filing shows
More than $38 million in bursaries, scholarships and other targeted donations to Laurentian University is gone, court documents show.
The fate of those donations has been an open question since the university declared insolvency in February 2021. But with the school seeking to emerge insolvency this fall, details of what happened to the money is becoming clear.
Court documents filed ahead of a July 28 hearing paint a detailed picture of how the school ended up in a financial crisis. Details include the fact the administration didn't segregate those funds into separate accounts. Instead, they were placed in general revenue and spent as LU's financial picture worsened.
"These deferred (restricted) contributions referred to research funds, scholarships and restricted donations that Laurentian had received and spent for other purposes, with no ability to satisfy the corresponding obligations based on its existing financial circumstances," the court filing said.
"Historically, these funds were received and deposited into Laurentian’s one operating account and comingled with all other sources of revenue. While this is not an uncommon practice among Ontario universities, other universities maintain sufficient cash reserves to cover all such obligations. Laurentian did not have funds set aside or available to satisfy the obligations represented by these deferred contributions."
In the six years before declaring insolvency, LU's accumulated operating deficit more than doubled, from $9.8 million to $20 million. Forecasts predicted that the annual operating shortfall would rise to $22.6 million by 2025-2026.
"Over the years, Laurentian’s long term-debt continued to increase to fund a major capital investment program while enrollment steadily declined," the documents said.
"Laurentian pursued growth in an effort to attract more students, but was ultimately unable to increase its revenue to address its financial issues."
The court filing lists seven major factors behind the crisis. They include an inability to change its course offerings. When it declared insolvency, LU offered 166 undergraduate programs. But 83 per cent of students were enrolled in the top 50 programs.
"For some programs and courses, there were virtually no students registered over a period of time and yet the cost of maintaining these programs and courses continued," the court filing said.
OTHER FACTORS:
- The former federated university model was also a major problem, costing the university $7.7 million a year in lost revenue.
- The pension plan had a deficit of $4.5 million, forcing LU to pay into it each year to cover the shortfall.
- Laurentian operated at a significant deficit, forcing it to rely on lines of credit just to keep operating. That meant there was no money for long-term planning. When the COVID-19 pandemic hit, LU was not prepared for the sudden drop in revenue.
Other details in the court filing includes the fact the province will buy $53.5 million in real estate from LU, money that will be used to pay creditors.
While the province will own the real estate, LU will continue to have the same access to the property. The province is also lending LU about $35 million to pay off private-sector lenders that advanced the school operating funds while it was in the insolvency process.
Creditors will be repaid using the $53.5 million in the real estate sale. A smaller group dubbed priority lenders will be repaid in full, while the majority of groups still owed money – dubbed 'affected creditors' -- will be repaid at a rate of between 14.1 cents and 24.2 cents on the dollar.
The next step in the process, assuming the July 28 hearing proceeds as planned, is to have creditors vote on what's known as the 'plan of arrangement' – basically LU's plan on how it will repay what it is owed, how much and to whom.
The vote would be held at a Sept. 14 hearing. To pass, it needs to be approved by a simple majority of creditors. What happens if creditors reject the plan?
"If Laurentian cannot obtain the necessary support of its affected creditors to the plan, it will be unable to resolve and settle its substantial debts," the court documents said.
"As a result, it is expected that the university will cease operating and will commence a liquidation process, which would include a sale of all assets including all buildings and real estate. Laurentian has no ability to offer any additional recovery to affected creditors other than what is offered under the plan."
Real the full court filing here.
CTVNews.ca Top Stories
Grandparent scam: London, Ont., senior beats fraudsters not once, but twice
It was a typical Tuesday for Mabel Beharrell, 84, until she got the call that would turn her world upside down. Her teenaged grandson was in trouble and needed her help.
Deaths of 4 people on Sask. farm confirmed as murder-suicide
The deaths of four people on a farm near the Saskatchewan village of Neudorf have been confirmed a murder-suicide.
CRA no longer requiring 'bare trust' reporting in 2023 tax return
The Canada Revenue Agency announced Thursday it will not require 'bare trust' reporting from Canadians that it introduced for the 2024 tax season, just four days before the April 2 deadline.
Full parole granted to man convicted in notorious 'McDonald's murders' in Cape Breton
The Parole Board of Canada has granted full parole to one of three men convicted in the brutal murders of three McDonald's restaurant workers in Cape Breton more than 30 years ago.
Incident on Calgary's Reconciliation Bridge comes to safe resolution
Nearly 20 hours after a man climbed and remained perched on top of the Reconciliation Bridge in downtown Calgary, the situation came to a peaceful resolution.
Sunshine list: These were the Ontario public sector's highest earners in 2023
Ontario released its annual sunshine list Thursday afternoon, noting that the largest year-over-year increases were in hospitals, municipalities, and post-secondary sectors.
George Washington family secrets revealed by DNA from unmarked 19th century graves
Genetic analysis has shed light on a long-standing mystery surrounding the fates of U.S. President George Washington's younger brother Samuel and his kin.
'We won't forget': How some Muslims view Poilievre's stance on Israel-Hamas war
A spokesman for a regional Muslim advocacy group says Conservative Leader Pierre Poilievre's stance on the Israel-Hamas war could complicate his party's relationship with Muslim Canadians.
Why some Christians are angry about Trump's 'God Bless the USA' Bible
Former U.S. President Donald Trump is officially selling a copy of the Bible themed to Lee Greenwood’s famous song, 'God Bless the USA.' But the concept of a Bible covered in the American flag has raised concern among religious circles.