BNZ calls receivers in on early childhood group Rainbow Corner and Porse

A Rainbow Corner childcare design for an East Tamaki Rd centre. Photo / Supplied

Receivers have been appointed to an early childhood education group, which the tax department is also trying to liquidate.

PwC’s Stephen White and John Fisk were appointed to The Rainbow Group of Companies Limited, as well as certain associated companies, on Tuesday.

The group consists of 13 Rainbow Corner early childhood education (ECE) centres across the country, a network of in-home-based childcare providers and an ECE private training establishment. All up, it has about 130 staff.

In total, 20 companies have ended up in receivership. Rainbow Corner is owned by Bhavini and Rrahul Dosshi.

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.

According to the Companies Office, it is a company owned by Huimin Chu and Brett Morris.

Financial difficulties

In a statement on Tuesday evening, receiver Stephen White said they were yet to fully establish the factors contributing to the financial issues faced by the group but expected suspensions and cancellation of a number of ECE licences – “which attracted recent media scrutiny” – would have contributed.

A consequence of the receivership was that any ECE licences held by companies in receivership were automatically suspended upon White and Fisk’s appointment.

That meant they had to suspend childcare operations with immediate effect.

“We appreciate that these closures will cause a number of families significant disruption in the coming days, but unfortunately there was no alternative option under the circumstances.

“The receivers are working closely with the Ministry of Education to minimise the impact on families to the greatest extent possible,” White said.

They would be briefing staff and contacting customers and other stakeholders in the coming days to update them on the impact of the receivership, while also determining options available to maximise recoveries for the group’s creditors.

White told BusinessDesk they had been appointed by the group’s secured lender, the Bank of New Zealand.

Liquidation application

According to the NZ Gazette, the Inland Revenue Department has filed applications to liquidate the parent company as well as five other subsidiaries.

Two applications are due to be heard this Friday at the High Court in Auckland with two on March 24 and another two a week later.

Porse

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.

Its annual report to March 2019 states it received $2.5 million from the disposal of discontinued operations.

The sale came after it undertook a strategic review of the brand and its fit with Evolve’s core centre-based activity.

It found the two businesses were serving “quite different and distinct markets, with limited overlap between the two activities”.

“Consequently, potential synergies between centre-based and home-based ECE have been limited.”

At the time, the company said the home-based provider accounted for less than 5 per cent of Evolve’s earnings.

Evolve ended up reaching a “formal agreement” with IRD in respect of various tax matters relating to Porse, which saw the subsidiary having to pay $3m.

-By Riley Kennedy of BusinessDesk