Business

Rainbows bankruptcy in flux

The fate of Rainbows United's bankruptcy reorganization plan is immersed in a disagreement among its lenders.

Emprise Bank, the nonprofit's lead lender for pre- and post-bankruptcy petition loans, has filed a motion in U.S. Bankruptcy Court to uncouple itself procedurally from three other funding partners on the pre-petition $2.1 million loan.

That motion is slated for a March 11 court hearing in U.S. Bankruptcy Court.

Emprise and two other partners also made a $1.5 million post-petition loan to Rainbows that is scheduled to be retired this winter from proceeds of two real estate sales, at 340 S. Broadway and the Ritchie Family Center at 251 S. Whittier.

The pre-petition loan, for $2.1 million on a long-term amortization schedule, includes Emprise, Equity Bank, Bank of America and Bank of Kansas, according to the motion filed Friday by Emprise attorney Karl Swartz of Morris, Laing, Evans, Brock & Kennedy.

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 one 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.

Brad Elliott, CEO of Equity Bank, said Monday that his bank "isn't a party to the bankruptcy" and declined to elaborate.

Tom Page, the Emprise president, and Ed Nazar, Rainbows' bankruptcy attorney, declined comment.

Rainbows filed for Chapter 11 bankruptcy reorganization protection on July 30.

In the filing, the organization cited $5.6 million in unpaid debts, including $2.3 million in federal withholding taxes, $2.4 million in unpaid bank loans and about $800,000 in other bills.

Rainbows United officials said at the time that misleading internal financial statements led to the bankruptcy, and no funds were embezzled.

The discrepancies in the organization's finances came to light after the unexpected resignation of chief financial officer Scott Richards on July 6. Richards had been with the agency for 14 years and had handled its finances for the past four, Rainbows officials said.

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