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Letter to the Editor: Rahkra in court

Posted: Tuesday, Feb 5th, 2013




Some of us have been following events in the bankruptcy court where Rahkra Mushroom Farm’s fate will be decided. This is the situation now as best we can tell.

Up until last November the prospects for the current ownership looked increasingly dim, because its financial performance since it filed for Chapter 11 protection had actually deteriorated. To survive Ch 11, the current ownership had to show that it could make Rahkra profitable. One of the largest creditors, the Colorado Department of Revenue (CDOR)—the tax man—demanded that Rahkra be moved into Chapter 7 and sold to the highest bidder, because of this poor performance and because of what it called Rahkra’s dishonesty. To this day there is a large conflict between CDOR and Rahkra, including over how much back taxes Rahkra owes.

On about Nov. 7 Rahkra pulled a rabbit out of a hat: it announced that it had found an investor that would invest up to $7 million over the next five years, enabling Rahkra (under a new name and new ownership, including one of the current owners) to pay a reasonable amount of its past-due bills while also expanding production.

CDOR strongly objected that no one knew who this investor was, what interest it had in mushrooms, or its ability to meet such financial commitments.

This conflict precipitated a fierce struggle between CDOR and Rahkra, and led to Rahkra submitting two successive new “reorganization” plans explaining how it would make the mushroom farm profitable with the new financing. Meanwhile, CDOR made a formal motion to strip Rahkra of Ch 11 protection and propel it into Ch 7, precipitating a fire sale.

This would not mean the mushroom farm would fold. Almost everyone agrees that the farm should and can be profitable. Several buyers seem to be waiting in the wings, hoping for a Ch. 7 so they could buy the farm at fire-sale prices. At least one of these potential buyers would probably give the employees a very good deal.

The case is steadily but ever so slowly winding through the courts. The judge must make a ruling on CDOR’s formal motion to shut Rahkra. But Rahkra has made a counter-motion for acceptance of its latest reorganization plan. If the judge accepts that plan, he would have to deny CDOR’s earlier motion. Much will depend on the judge’s evaluation of CDOR’s forceful objections. The final hearing on Rahkra’s final motion is on Feb. 20. Yet that still may not be the end of it. The judge would still have to rule, and whichever party loses either motion may file an appeal, dragging the whole issue out further. The judge would not want to be reversed on appeal and is moving cautiously. The biggest winners so far appear to be the lawyers.

The opinion of us following the court case is that the mushroom farm will survive because of its potential high profitability. Under what owner we won’t guess. Nor can we guess when the court process will end. But brighter days may lie somewhere ahead for the farm. Former employees who hope to be rehired may be rewarded for their patience.



Robert Ghelardi












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