Laurentian created 'manufactured crisis' to cut ties with 3 schools for $10M loan, lawyer argues

Laurentian University's attempts to cut ties with three federated schools, as part of efforts to qualify for a $10-million loan to help it continue with restructuring for survival, was met with heated opposition in Ontario Superior Court on Thursday.

Laurentian lawyer D.J. Millerargued the Sudburyuniversitywouldn't'be sustainable without the loan, so needs to endcontracts with ThorneloeUniversity,the University of Sudburyand Huntington University, includingto keep $7.7 million in grants and funding that would normally flow to those partners.

Miller also toldJustice Geoffrey Morawetzthat Laurentian severing its relationship with the three other universitiesis a requirement of getting approved forthe loan fromFirm Capital Mortgage Fund Inc.

Laurentian"cannot put forward a viable plan if it does not have the ability to stop the flow of money from Laurentian to the federated universities," she said.

Thehearing is the university'slatest move in its ongoing attempts to operate while trying to gain financial stability as part of the insolvency process under theCompanies' Creditors Arrangement Act (CCAA).The universityneeds the court's approval to move forward with restructuring.

Earlier this month,the school started making deep cuts to staff and programs, prompting outcry from students, staff and supporters, and calls for governments to step in. The federated universities, in turn, launched court challenges after Laurentian announced cutting ties with them would be an important part of becoming financially viable again.

Schools say cost to cut ties overblown

Thorneloe and the University of Sudbury, however, saythere's no cost toLaurentian to maintain ties with them, and ending the federated agreements would drive Thorneloe, at least, into its own financial crisis.

For its part, Huntingtonhas reached an agreementto sell its online gerontology program to Laurentian and cease offering courses.

But during Thursday'scourt proceedings, it was revealed that if the other twouniversities win their court challenges, Huntington would also benefit and retain its federated status.

Andrew Hatnay, lawyer representingThorneloe, accused Laurentian ofjust "plain mismanagement," saying itwould only retain $1.8 million from ending its agreement with Thorneloe alone.

Hatnayargued Laurentian isexploiting the restructuring process, saying it simply wants to stop students from taking Thorneloe courses and direct them to Laurentian tolessen competition.

He said Laurentian's claim it needs a loan quickly, by the April 30 deadline, is a"manufactured crisis," and he accused Laurentianof deploying "tactics" to reach its financial goals.

Laurentian lawyer deflects competition idea

Miller saidcutting personnel and programs wereonly part of the initial attempts to show how Laurentian would immediately reduce costs.She saidthe lending condition that the federated partners be severed was added April 19, after time was spent trying to negotiate a consensual agreement with them.

She dismissed the argumentLaurentian simply wants to reduce competition.

"Evidence is clear, and the testimony of [Laurentian] president Robert Hachhas been abundantly clear, that to suggest that Thorneloe and Laurentian are in competition is to suggest that a store that sells computers down the road is in competition with Dell," she said.

"This is not about eliminating the competition. There are three service providers here moving to one service provider which will provide service to all students."

Miller said Laurentian plans to use its own faculty and facilities, so isn't in need of support from the other schools.

If the federated universities win court challenges to stop the split, it would lead toLaurentian's demise, she said.

The University of Sudbury's case against Laurentian's separation planisscheduled to be heard by another judge on Friday.

Laurentian wants the court to extend its protection against creditors until Aug. 31, so it can apply for the $10 million thatwould allow it to operatewhile restructuring, and to get the OK to split with the three federated universities the request that's met the most resistance.

Miller said theloan would also allow it to teachspring courses as well as six Indigenous studies courses, and to meet the terms it agreed on with Huntington University, including paying $1.2 million into apension plan andLaurentian would acquire Huntington'sgerontology program.

Lender has 'a lot of skin in the game'

Vern Da Re, representingFirm Capital Mortgage Fundin court, confirmed the lender's condition that Laurentian end its agreements with the federated universities to qualify for loan money on top of the $25 million it already lent to Laurentian.

"I don't think my client should be forced to advance $10 millionthat would have a chilling effect on further loans," Da Re said.

He saidhis client simply wants to know his loan will be repaid, and emphasized these are all business decisions.

"We've got a lot of skin in the game."

Morawetz expressed frustration that he was being askedto make a critical decision within a short amount of time.

"Could this timing crisis not been averted with actions entirely within the power of the applicant?" the judge asked.

But Morawetzsaidhe and the judge in the University of Sudbury hearing willdeliver written decisions sometime before 11 p.m. ET on Sunday.

Classes for Laurentian's spring term start May 3.