Thorneloe would face bankruptcy if relationship with Laurentian terminated, report says
SUDBURY -- Thorneloe University says it would have to enter an insolvency process of its own if Laurentian University is allowed to terminate its agreement with federated universities, court documents show.
That information is part of the third report of the monitor overseeing the insolvency of Laurentian University, a report that offers insight into several aspects of the process so far.
"The disclaimer will result in significant financial hardship for Thorneloe and result in Thorneloe having to make an insolvency filing pursuant to the (Companies' Creditor Arrangement Act) or Bankruptcy and Insolvency Act," says the April 26 report by Ernst & Young, the mediator overseeing the process.
Ernst & Young was quoting from court documents Thorneloe filed in support of its motion.
Thorneloe is trying to block LU's plan to terminate its agreement with its federated universities, which includes the University of Sudbury, Huntington and Thorneloe. Huntington has signed a separate deal with Laurentian, while the University of Sudbury is also fighting the termination, with an eye on taking over all French-language programs currently offered by LU.
A hearing to deal with Thorneloe's motion is set for April 29, while the U of S will have a bilingual hearing April 30.
The mediator's report also detailed the impact of the program and staffing cuts announced so far. Under its previous financial model, Laurentian was facing operating deficits of $13.7 million to $16 million a year. That amount doesn't include other costs, such as funding some research operations, recruitment activities or repaying emergency loans under the insolvency process.
The report said the restructuring focused on keeping programs with high demand, or ones that are expected to have high demand in the future.
"This analysis largely focused on analyzing enrolment data as programs with very low enrolment are not able to cover even the direct faculty teaching cost of the program, let alone other costs of the program," the report said.
Have saved $30.3 million so far
"The program closures include 38 English-language undergraduate programs and 27 French-language undergraduate programs. This means that LU will continue to offer 63 remaining English-language undergraduate programs and 38 remaining French-language undergraduate programs."
While 39 per cent of programs are being closed, the report said only 7.5 per cent of undergraduate students will be affected by the changes, and 3.7 per cent of graduate students.
Through the program and staffing cuts, as well as concessions from unions at LU, the school has so far saved about $30.3 million a year in operating costs, an amount that will rise to $33.5 million in the next few years. While that addresses its operational deficit, the report said more savings are needed to cover other expenses, including repaying emergency funding and paying its long-term debts that run into the hundreds of millions of dollars.
Terminating the agreement with the federated universities would save another $7.1 million to $7.3 million a year, the report said.
"The monitor recognizes the potential financial hardship that the Notices of Disclaimer may have for the federated universities," the report said. "However, given the additional savings required for LU to have a reasonable opportunity to put forward a viable plan of compromise or arrangement and effect a successful restructuring, the monitor is of the view that the disclaimer of the federated universities agreements is necessary."
A court hearing April 29 will determine whether LU has made enough progress to extend the process to Aug. 31, allowing it to access another $10 million it needs to keep operating until then.