Easy Mind 'a failure' despite funding withdrawal

The liquidator of a national home-based childcare provider says the company would have failed even if it had not run into problems with its Ministry of Education funding.

The shareholders of Easy Mind called in the liquidators this month and its North Island business has this week been sold to rival providers.

The Southland and Otago operations were closed because the liquidators could not secure the short-term cash required to pay staff.

The company had 23 home-based childcare networks caring for around 800 children.

The Ministry of Education would not accept an initial proposal to keep Easy Mind operating for another three weeks, because of its previous financial dealings with the company, liquidator Thomas Rodewald said.

The Ministry had deducted what it argued was an over-payment of $350,000 for November and given reduced funding to Easy Mind's newest network because of concerns the company had been over-estimating child numbers.

However the business had failed because it had grown too quickly without the necessary capital base, he said.

Founders Fred and Clare Grace had also set up a trust to try to establish five daycare centres. A large cost was involved and the trust currently owed Easy Mind $460,000.

"Even if the ministry had paid them that $350,000 and given them better advance payments, that would have been insufficient to pay the IRD and get through to the 2nd of March [ministry funding round]."

Information provided by the owners showed Easy Mind's assets, including the trust debt, exceeded its liabilities of $3.6 million. But the liquidators believed that the book value of the assets was substantially greater than the true market value.

The liquidators would investigate the possibility that some creditors had been paid ahead of others and related-party transactions involving properties owned by the Graces which were leased to Easy Mind.

However, Rodewald said his "gut feeling" was that the company's problems came down to bad management.

Te Awamutu-based childcare provider Kids At Home has bought the Waikato and Coromandel arms of Easy Mind, trebling the size of its business.

Another home-based provider, Waipukurau company Scallywaggs Sprouts, has purchased the Hawkes Bay, Palmerston North, Fielding and Gisborne operations.