Rainbows reorganization OK'd
03/25/2010 12:00 AM
08/06/2014 10:15 AM
A U.S. Bankruptcy Court judge on Wednesday approved Rainbows United's Chapter 11 reorganization plan, removing a major obstacle in the nonprofit's emergence from bankruptcy.
Judge Robert Nugent approved a multi-pronged plan that sets up a payment schedule for the group's biggest debts and pays off a $1.5 million post-petition loan to keep it afloat.
Nugent wished Rainbows officials luck from the bench, including new CEO Deb Voth, who was in the audience.
Afterward, some of those officials called the judge's ruling a relief.
"It does help provide some closure over what's happened the past eight months," Voth said. "We've had to make some really hard decisions that have impacted a lot of our staff, and that's been hard. But making those decisions and following through on the plan does secure the future of Rainbows."
"It shows that Rainbows has a good reputation, provides a good service, and the community values what we do," board chairman Steve Cox said.
"It's one more step to allow us to focus on the services we provide to our children. It's a tremendous relief for the people on our board, and I know it's a relief for a staff that has done a tremendous job throughout this process — not losing its focus that it's all about the children."
Rainbows, which serves children with special needs and their families, filed for Chapter 11 in July after the nonprofit's board of directors discovered "financial irregularities" in the group's financial reports.
Nugent's approval comes five days after Rainbows creditors overwhelmingly approved the nonprofit's reorganization plan.
Only one — Rusty Eck Ford, with a $1,481 claim — voted against the plan.
The nonprofit's biggest creditors, a lending consortium headed by Emprise Bank that is owed $2.1 million, did not vote on the reorganization plan. One of its partners, Equity Bank, opposed the plan, bank officials said.
The major elements of the reorganization, according to bankruptcy attorney Ed Nazar, include:
* A 30-year note to repay the $2.1 million balance to Emprise and its partners. Interest rates begin at 5.75 percent, Nazar said, and will be adjusted annually.
However, that balance will be reduced soon, Nazar said, with some of the sale proceeds from Rainbows' sale of the 251 S. Whittier property.
That sale and the sale of a building at 340 S. Broadway will cover the costs of a $1.5 million post-petition loan to Rainbows for operating expenses during the bankruptcy, the attorney said.
* Settlement of the nonprofit's $2.3 million bill with the Internal Revenue Service and a $50,000 bill with the Kansas Department of Revenue over five years.
Nazar said Wednesday that any penalties associated with the back taxes will be forgiven if the tax bill is paid in a timely fashion.
* Reorganizaton manager Hale Ritchie, a retired Wichita businessman, stepped aside March 1 when Voth was named CEO, Nazar said.
Voth said she's ready to get past the bankruptcy.
"We have a lot of work ahead of us to make the plan successful," she said. "But it does allow us to focus again on the services we provide and not the legal issues."
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