Childcare giant asks for bank clemency as earnings are pressured

The Netherlands’ biggest daycare group Catalpa, bought by US private equity group Providence Equity Partners in 2010, has asked the banks to renegotiate its credit agreements as earnings fail to meet forecasts, the Financieele Dagblad reports on Tuesday.

Catalpa took on a loan of €230m when it was taken over by Providence for almost €500m in what was then a growing market. The group’s debt is currently 4.75 times its operating profit and the agreement states this should be reduced over time.
But government cuts and the economic crisis mean earnings are not on target and the company risks breaking the agreement with the banks on cutting its debt-to-operating profit ratio, the paper states.
Negotiations on removing this requirement in 2012 and possibly 2013 are under way and should be completed on March 29.
Catalpa, now renamed Estro, has introduced internal cost-cutting measures and reduced its business units from 13 to six. The company has 600 daycare centres and a workforce of some 6,000.
The government has reduced subsidies for pre-school childcare from this year and may do so again in 2013. Research published earlier this month by the FNV trade union federation showed demand for places is down 12%.

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