Equity takes on Emprise in Rainbows bankruptcy
03/11/2014 5:29 AM
08/06/2014 10:15 AM
The battle of the banks continues in the Rainbows United bankruptcy, with a secondary lender accusing the nonprofit's lead bank of changing loan terms without its consent.
Attorneys for Equity Bank claim in a March 3 federal court filing that Emprise Bank — the lead lender in a consortium of banks for Rainbows — agreed to a loan modification and applied proceeds from collateral securing the original note to other loans Emprise has with Rainbows.
A hearing has been scheduled for 10:30 a.m. today before U.S. Bankruptcy Judge Bob Nugent.
The Equity filing is a response to action filed last month by Emprise. Emprise is Rainbows' lead lender for pre- and post-bankruptcy petition loans, the former for $2.1 million and the latter for $1.5 million to keep Rainbows open during bankruptcy.
Emprise wants to uncouple itself procedurally from three other funding partners, including Equity, on the pre-petition $2.1 million loan. That request also will be heard today by Nugent.
Equity attorney Mark Lazzo of Wichita is asking that the uncoupling request be denied. Lazzo did not return calls seeking comment.
Equity Bank president Brad Elliott said the motion is self-explanatory.
"This motion has nothing to do with Equity Bank's feelings about what Rainbows provides this community," Elliott said. "It's all between financial institutions and their dealings that should be taken care of through what contracts say they'll do."
The pre-petition loan includes Emprise, Equity Bank, Bank of America and Bank of Kansas, according to the motion filed last month by Emprise attorney Karl Swartz of Morris, Laing, Evans, Brock & Kennedy in Wichita.
Swartz said that Emprise will address the new Equity claim today.
Emprise is the biggest contributor to that loan package, at $1.26 million, according to court documents.
According to the motion, the lenders would have a single collective vote on Rainbows' reorganization plan, which is set for a court hearing on March 24.
In it, Swartz writes that Emprise plans to vote to accept the reorganization plan but that it expects at least one of the loan participants — Equity Bank, according to several sources close to the bankruptcy — will "withhold its consent to Emprise's vote to accept the plan and will request that Emprise vote to reject the plan."
As a result, the petition seeks to allow each of the four funding banks to vote separately on the loan.