Bain Capital declared earlier this year that its Only About Children business is worthless, as buyers of distressed debt apply close scrutiny to its loans.
The private equity firm is currently embroiled in a NSW Supreme Court case over payments to the childcare company’s founder, Brendan McAssey, who alleges he is owed $38m from Bain Capital for performance hurdles he claims he met between 2017 and 2019.
However, in court documents, it said that on April 20, the board of Nemo BC Holdco, which is the holding company for Only About Children, determined that the fair market value of the childcare provider as at April 3 was $0.
Only About Children is among a number of childcare providers that have suffered from challenging trading conditions linked to COVID-19, as children are withdrawn from centres, either due to fears around the virus or because their parents are now out of work.
Its founder, Brendan McAssey, remains a minor shareholder.
The court case compounds challenges for Bain Capital, which is also facing a battle with Virgin Australia bondholders, owed $2bn.
The bondholders are attempting to derail the private equity firm’s bid for the airline.
Bondholders are concerned that they will be offered little payment on their investment if the airline falls into Bain’s hands.
The case surrounding Only About Children is scheduled for a hearing in February. Bain has launched its own cross claim against that brought by Mr McAssey, arguing that he did not meet the requirements to receive the $38m payment due to non-compete-related matters surrounding the development of his own childcare centres.
Bain Capital purchased Only About Children in 2016 from Mr McAssey, who at the time was the CEO.
Bain has since bolstered the business, which operates at more than 70 locations, with the acquisition of Little Learning in 2018.
The price paid for Only About Children was never disclosed, but it was understood to be about $400m, and it has debt of about $218m, according to accounts for the 2019 financial year. Debt was refinanced in 2018 through Goldman Sachs.
Mr McAssey started the business in 2002 after a long career in investment banking. He sold childcare investments to Eddy Groves from ABC Learning before buying some centres back when that business collapsed during the global financial crisis. He then took the business up-market.
Recently, the company has been under close watch from distressed investors, interested in buying loans from the existing financiers.
Currently, Bain is in talks with its lenders about waiving debt covenants as it faces headwinds amid the global pandemic.
Discussions were held late last week.
Among groups said to have cast their eyes over the group’s debt are Oaktree Capital Management, The Carlyle Group and Apollo Global Management.
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