The fate of El Cerrito's Windrush School, which is trying to stay under bankruptcy protection so that it can keep creditors at bay, remained uncertain Thursday following an inconclusive hearing in U.S. Bankruptcy Court.
Attorneys for the school and for creditors who hold Windrush bonds told the court that there's been a snag in the that would turn the school over to the creditors and allow it to continue operating the rest of this school year.
Unable to continue making payments due on a $13 million bond debt, the K-8 private school entered Chapter 11 bankruptcy protection on Sept. 30 to prevent creditors from seizing the school as collateral. Wells Fargo Bank, trustee for the creditors, challenged the bankruptcy protection, and the U.S. Bankruptcy Court in Oakland has been conducting hearings on the case.
In a hearing on Oct. 28, the two sides disclosed a tentative settlement that the school announced would be signed Nov. 2. The pact, however, , and the reason, revealed Thursday, is a disgreement over the school's budget, the attorneys said.
Windrush attorney Merle Meyers said there's 99-percent agreement on "the general framework of a settlement" but that the two sides remain separated by a disagreement over the school budget.
Mike Buckley, attorney for Wells Fargo, said the school's budget does not conform to standard school accounting in the view of the bondholders' analyst. "It's the lack of credibility ... that's the real sticking point," he said.
Meyers objected, saying the school views its budget as "perfectly credible."
Judge William Lafferty said that he or another judge would be happy to help serve as mediators in the dispute. Meyers said Windrush would welcome judicial mediation, but Buckley questioned whether it could be fruitful, saying that such a process would not occur in a place where needed records are located. At the end of the hearing, the offer remained extended but not yet accepted.
Buckley said both sides continue to negotiate. "The phone calls and emails are going back and forth fast and furious," he said.
The parties agreed to return to court for the next hearing at 9:30 a.m. on Nov. 29. If the settlement agreement is not reached by then, then the two sides agreed that they would be prepared to continue with the bankruptcy case. The settlement would dismiss the bankruptcy.
After Windrush defaulted on its debt, the bondholders moved to seize the school property and the cash assets. The school filed for bankruptcy protection to prevent a seizure, and the judge has granted temporary bankruptcy protection pending completion of hearings.
Judge Lafferty began the hearing Thursday by saying that he had been misquoted in the press about a comment he made at the Oct. 28 hearing after the tentative settlement was announced. that he had concluded by congratulating Meyers and the school administration on the result. At Thursday's hearing, Lafferty said his Oct. 28 congratulations applied to all involved.
For more background on the Windrush crisis, 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 green "Keep me posted!" button below the article.