Childcare chain Rainbow Corner owes $19m to Inland Revenue, creditors

Inland Revenue wants a further $7.6m after the financial implosion of a national early childhood education group. Photo / Supplied

Inland Revenue and creditors are claiming $19 million from the big financial failure of a national early childhood education group of companies, according to the receivers’ first report this month.

On March 14, PwC’s Stephen White and John Fisk were appointed to The Rainbow Group of Companies and associated companies whose first-ranking secured creditors want $11.4m.

Inland Revenue wants a further $7.6m.

That amounts to the estimated $19m of claims.

The group operated 13 Rainbow Corner early childhood education centres nationally, a network of Porse in-home-based childcare providers and an early childhood centre private training business.

It employed 124 staff but faced financial and operational challenges, including the suspension and cancellation of some early childcare education licences.

Secured lender BNZ tipped the company into receivership. Loan terms had been in default and the companies couldn’t pay their debts.

Rainbow Corner is owned by Bhavini and Rrahul Dosshi.

BNZ holds the first-ranking security interests over each of the companies as well as a cross-guarantee for the debts of the group.

Centres were at Gulf Harbour, Manurewa, East Tāmaki, Tauranga’s Bethlehem, Hamilton, Christchurch, Queenstown and Invercargill.

When the receivership occurred, the Ministry of Education suspended all licences the companies held. That meant childcare operations stopped immediately, the receivers’ report said.

Landlords had been advised of PwC’s appointment and site access was requested in the audit of the business. Inventories of known assets and independent valuations were undertaken. Company assets were listed for sale via Trade Me.

Employees are owed about $640,000. To date, they have been paid $95,000 relating to wages only, the receivers said.

Part of PwC’s job in the receivership was arranging collection of all personal goods for staff and parents from numerous sites where the businesses operated nationally.

All staff and affected personnel had to be told about the termination of their employment contracts. The receivers held in-person staff briefings and online briefings with employees of sites which had already been shut before the receivership occurred.

Inland Revenue notified the receivers of GST, PAYE and other payroll deductions owed.

PwC has arranged continued insurance cover for all the assets of the many companies, as well as discussing licence suspensions and course accreditations with the ministry and the Tertiary Education Commission.

Just $77,000 was received for chattels sold at various locations via the Trade Me process.

One of the companies in receivership - The Rainbow Corner East Tamaki Holdings - owns a property at 417a East Tāmaki Rd, Auckland. The receivers engaged a valuer and are planning to sell that.

This isn’t the only early childhood centre business failure. In 2020, 11 Auckland daycare/early childcare centre companies were placed in liquidation after licences were cancelled by the ministry and a WorkSafe prosecution after a tree toppled on toddlers.

As the Herald reported last week, 285 early learning centres nationwide have closed their doors in the past two years, a situation Early Childhood Council chief executive Simon Laube called “deeply worrying”.

In late 2018, Porse was sold by NZX-listed Evolve Education, now known as Embark Education, to Rainbow Corner. At the same time, it also sold Au Pair Link.

Stuff reported in January that Porse, the in-home-based childcare provider which is part of the receivership, had been sold to Auckland-based No-1 Homecare.