Laurentian University cash flow subject to uncertainty created by the pandemic

A judge who's approved Laurentian's request to extend a stay of proceedings of the Companies' Creditors Arrangement Act (CCAA) has heard the university is managing the double challenges of the pandemic and restructuring as responsibly as possible, but the situation remains "dynamic."

The extension approved by Justice Geoffrey Morawetz means the university doesn't have to pay back its loan of $35 million until the end of January, 2022.

There is, however, a fee to Laurentian to extend the deadline: an additional $350,000.

The bridge financing allows the university to operate and get its affairs in order while figuring out how to become financially sustainable.

Laurentian declared insolvency Feb. 1 when it announced it didn't have enough cash to cover payroll until the end of the month.

Since then, the university has achieved permanent savings of $40 million, representing 25 per cent of its operating budget through deep cuts to programs, jobs, new labour agreements, as well as severing ties with its federated partner universities and assuming delivery of some of their courses.

 A lawyer representing Laurentian, D.J. Miller, said the current bridge financing should see the university through to the end of January, when it expects to have a plan to satisfy creditors and exit CCAA protection.

COVID-19 affects cash flow forecast

In the meantime, during Friday's hearing in Ontario Superior Court, Miller described how factors such as the pandemic are influencing the financial situation at Laurentian and the resumption of a new academic year.

"It's been a very dynamic environment in dealing with the changing recommendations of the health and safety officials and the university has been managing that as other universities have, quickly and responsibly," said Miller.

She noted the pandemic has made it difficult to make cash flow projections and will continue to do so, but so far, the university has done a good job.

"In terms of the campus operations, as I mentioned, the pandemic has required a great deal of flexibility and quick decisions and the ability to pivot on some aspects because the advice has been changing fairly rapidly," she says. 

"It wasn't clear, for example, until the middle of the summer or earlier in the summer whether students would even be permitted to return to campus in person, whether the residences would be able to be utilized, and if so, what might be required in order to have those available and accommodate the health and safety concerns. It wasn't clear whether teaching would be able to take place in person or if it would have to be online or some combination. So all of those factors made it a very, very fluid dynamic, and difficult to project and plan in the midst of an ordinary course school year." 

The campus is welcoming students and staff back in person while also offering online course work in a hybrid model.

Decline in 1st-year enrolment expected 

Miller said uncertainties remain as the university tries to get a handle on enrolment numbers, which will have an effect on the university's bottom line.

President and vice-chancellor Robert Haché, in an affidavit filed with the court, forecasts a decline of 30 per cent in first-year students, but final enrolment figures including returning students won't be finalized until later in the fall.

"Because of the nature of how enrolment data can change, given, you know, add/drop dates and that type of thing, enrolment data is actually not provided to the ministry every year until November for that reason, because it is a fluid number," said Miller. "But we will have a better sense of enrolment in that in the next coming weeks." 

She said residences are for the most part full, with no wait list, but the cash flow forecast includes certain calculations about tuition and residence fees, and is based on the assumption refunds won't have to be given if the situation changes.

"I won't go through all of the assumptions," said Miller. "While there are a number of positive variances as reflected in the cash flow forecast, I think it's safe to say that continued prudence is the measure that is being followed."

Ashley Taylor, a lawyer representing the court monitor, Ernst and Young, said the bridge financing creates a "safety backstop," but the situation remains subject to change.

"Due to the uncertainty created by the COVID pandemic, a return to online teaching and students not staying in residence would have a significant impact upon the university's revenues and the cash flow forecast," he said.

"We can confirm the challenges that Miss Miller outlined face the university in achieving everything that needs to be done in order to effect this restructuring as quickly as possible," continued Taylor. "But notwithstanding those challenges, Laurentian has made significant strides in its restructuring efforts. There is still a lot of work to do, completing the claims process, negotiating the terms of the restructuring plan, as well as moving towards a meeting of creditors. 

Laurentian is also involved in a review of its real estate assets, and has issued a request for proposals for firms to conduct operational and governance reviews.