Judge Grants Windrush a Hearing

In its latest struggle to limp to the end of the school year before closing, Windrush School won a small victory in U.S. Bankruptcy Court Wednesday when a judge agreed to reopen the case between the indebted school and Wells Fargo Bank.

A hearing was set for 9:30 a.m. Friday on Well Fargo's claim that the school broke an agreement with the bank and should close by May 17, before the end of the school year in June, when the 35-year-old private school had planned to .

The last year defaulted on its debt for school construction bonds and reached an agreement with the bank, which represents the bondholders, to turn over the school to the creditors at the end of the current school year. The agreement – reached after prolonged legal disputes in U.S. Bankruptcy Court – required the school turn over its revenues to Wells Fargo in exchange for a periodic allowance according to an agreed budget.

On April 17, saying it had exceeded the allowed amount for salaries and payroll and that, as required by the agreement, Windrush is obliged to "immediately commence a wind down of its operations" and vacate the school property within 30 days, by May 17. The bank said it would not provide funding to finish the school year.

The attorney for Wells Fargo, Mike Buckley, said in court that the bank would allow the school to continue occupying the site until the end of the school year if it funded itself. 

Windrush petitioned the Bankruptcy Court to issue a restraining order against the bank and said in court papers that the school had not broken the agreement. 

In response, Wells Fargo said in court papers that the Bankruptcy Court lacked jurisdiction to hear the case because the . The bank also said that the school had not spent the budgeted amount for repairs and maintenance, raising concerns about protection of the school property, which was collateral for the school's $13 million bond debt.

After a recess to review legal precedent, Judge William Lafferty agreed to reopen the case and grant a hearing on the conflicting claims. "I find ample jurisdictional basis for me to re-enter this issue," he said.

Lafferty said he needs to hear more evidence before he can come to a conclusion about who's right. 

"I'm really not convinced in my mind that there was or wasn't a breach of the settlement agreement by the debtor and/or whether the bank would be in breach by not turning over funds," he said.

He said he was also concerned about the maintenance of the school property: "If there's something that's neglected and that has harmed the collateral, I'm going to be very worried about that."

The attorney for Windrush, Merle Meyers, indicated that Windrush is prepared to address any concerns about protection of the property.

The school earlier announced it was trimming staff and programs, including combining some classes, to make it through the end of the year. It held a bittersweet farewell celebration April 21.

For more background on the Windrush financial collapse, you can see our past stories by clicking "Windrush School" next to Related Topics below this article. For alerts on future Windrush stories, click the Keep me posted button below the article. We've also posted a list of all Patch stories on the Windrush crisis at the top of our original article, "Crisis at Windrush School: Threat of Imminent Closure."