The Netherlands’ biggest childcare group Catalpa has seen its debts soar since its takeover by US private equity group Providence last year, the NRC reports on Tuesday.

Catalpa, which cares for 40,000 children at 540 locations nationwide, has borrowed €225m from its parent at an interest rate of 15%, the paper says. The company is now operating at a loss, a situation which is expected to continue for years to come, the paper says.
The debt construction, which allows foreign companies to reduce the tax they pay on their profits by deducting the interest on debts from the gross profit total, is common in private equity takeovers.
Tax break
However, junior finance minister Frans Weekers is currently working on plans to limit tax deductions for private equity groups which saddle their new acquisitions with large debts.
Research by the Volkskrant last year showed companies such as NXP, Hema and Ziggo had been loaded with debt by their new owners. By deducting the interest from earnings, the companies make a loss on paper and have to pay very little tax.
Catalpa’s shareholders’ equity has now slumped to below 8% of the balance sheet total.
However, the group’s main competitors are in a much better financial position, the NRC says. Kinderopvang Nederland, with 400 branches, and Humanitas, with 300, are both virtually debt free with shareholders’ equity of over 40% of the balance sheet total. They also both make a profit.
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