An Upper West Side private school is trying to raise enough cash to stay afloat until the end of the school year after a New York bankruptcy judge rejected its request for an emergency loan.
Manhattan Country School and a little-known foundation called Casa Laxmi are asking for donations to make payroll and keep the school open until graduation on June 12, according to Kiran Kulkarni, Casa Laxmi’s chief executive officer and chairman of the school’s board.
Kulkarni said the school is also collecting “soft loans,” which he defined as contributions from people who couldn’t afford to donate and need to be repaid in a year or two.
“We’re reaching out to everybody,” Kulkarni said in an interview. “We’re still fighting and working and going to do everything possible to make sure it continues.”
The progressive school, founded in 1966, filed for Chapter 11 bankruptcy on May 16 and asked the court to approve a funding plan that would have seen Casa Laxmi lend MCS as much as $8 million to stave off imminent closure and sustain it for the next four months.
The bankruptcy court rejected the plan on Tuesday in part because it included a provision that would have pushed the Casa Laxmi loan ahead of existing debt MCS owes Flushing Bank. The bank has said it allowed MCS to delay repaying its obligations for years before finally bringing a foreclosure action in October.
MCS owes Flushing Bank roughly $25 million. That debt is secured by mortgages on its Upper West Side school building. Another issue judge David S. Jones raised during the hearing was over the school using a 2021 appraisal that pegged the building’s worth at $38 million.
Kulkarni said the school believes a new appraisal of the property will address the court’s concern and said they are in the process of hiring an appraiser. In the meantime, the school plans to use donations to cover staff payroll that was missed on May 15, and cover the upcoming pay period that will end on May 31.
In the hearing earlier this week, Jones expressed regret for the impact his ruling could have on students and their families and urged lawyers to devise financing on different terms or provide additional evidence so he could authorize the loan.
Bankruptcy court is protective of lenders whose debt is secured by company collateral, and the ruling against the school was predictable, according to Joseph Shifer, a Pryor Cashman restructuring lawyer not involved in the MCS case.
“It’s not surprising that a judge would be reticent to approve such a loan without convincing evidence,” he said.
Kulkarni said the school is working on a number of different solutions, and the priority is having enough funds to pay employees and keep the school going until the end of this academic year.
“There are many plans continuously in process,” said Kulkarni. “Nothing is closing.”
