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The Wall Street Journal reports that a Bain-owned cable-box repair company called Contec Holdings Ltd, is filing for bankruptcy protection as soon as this week. The article pointed out that Mitt Romney left Bain Capital "years before" Bain acquired Contec in 2008. In other words, this story has nothing to do with Mitt Romney. But wait, didn't I read something interesting this morning? For The IRS, Mitt Romney Was 'Active' in Bain in 2009.

Contec is expected to file a so-called prepackaged bankruptcy, in which creditors bless a restructuring plan ahead of time and thereby limit the company's stay in court proceedings, the people said.

Bain, a Boston-based investment firm, acquired Contec from another buyout shop in 2008. The restructuring agreement will wipe out Bain's investment, which the firm has already written down to zero, and hand Contec to lenders, the people said. Contec will eliminate more than $300 million of debt under the bankruptcy plan, the people said.


Bain bought Contec in a $525 million deal in 2008. Bain invested $215 million in equity in the deal and put $180 million of debt on the company to back the purchase, said a person familiar with the transaction. Contec's previous owner invested another $120 million in debt as part of the deal, this person said.

Bain didn't load Contec with outsized debt compared with some other leveraged buyouts during boom times for such deals. The debt component of the deal was around 60%. Some other private-equity buyouts have featured 90% debt.

Oh that makes me feel so much better, knowing Bain didn't load the company down with debt. Are you trying to say that the need to file for bankruptcy protection wasn't Bain's fault this time?
Still, Contec's debt proved too much amid the financial crisis, as cable subscriptions dropped and cash-strapped consumers put off fixing broken set-top boxes, said people familiar with the matter.

As of July 28, Contec employed 177 people in the U.S. and 2,134 people in Mexico, the people said.

This is a restructuring of the company, so those employees will be able to keep their jobs, right? Wait a minute. Why are most of these people located in Mexico? A visit to the Contec Holdings Ltd official website has a plausible explanation.
In 2002 we acquired WorldWide Digital, formerly Motorola Broadband Communications Sector in Matamoros, Mexico. Their highly trained and experienced staff brought additional service offerings to the mix. Data and VoIP modems and satellite receivers are repaired at this facility, in addition to Motorola and Scientific Atlanta set-tops.

Our Contec de Mexico facility in Mexico City serves South America predominantly, with Motorola, Scientific Atlanta and Philips digital set-top repairs and remanufactured set-tops.

So that means that all those people were already working for Contec in Mexico because Contec acquired the Mexican location in 2002, and Bain Capital acquired Contec in 2008. That explains things. Except that over a week ago, according to the Times Union in Albany, New York:
While some say private equity firm Bain Capital has been a job creator some former employees of set-top cable-box repair company Contec Holdings in Schenectady may beg to differ.

Three summers ago, Contec laid off 132 employees and shifted production to Mexico and elsewhere.

Contec's owner is Bain Capital, which had acquired Contec from American Capital for $525 million in 2008.

The reason for the job shift? Economic pressures, said Contec's chief operating officer.

Contec has engineering and administrative offices in Schenectady, although it's not clear how many people work there. A spokesman couldn't be reached Friday for comment.

Bain of their nonexistence, Times Union, August 18, 2012

Originally posted to hungrycoyote on Mon Aug 27, 2012 at 09:26 AM PDT.

Also republished by The Bain Files.

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Comment Preferences

  •  Tip Jar (18+ / 0-)

    For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

    by hungrycoyote on Mon Aug 27, 2012 at 09:26:57 AM PDT

  •  Not sure I follow.. (2+ / 0-)
    Recommended by:
    hungrycoyote, Trotskyrepublican

    They  paid $215 million.

    Put $180 million of debt on the company.

    Does this mean they paid 215-180=35?

    So they could start taking fees, etc?

    Be the change you want to see in the world. -Gandhi

    by DRo on Mon Aug 27, 2012 at 09:50:50 AM PDT

    •  The way I read it, it looks like (3+ / 0-)
      Recommended by:
      DRo, Sandino, maybeeso in michigan

      Bain is getting out of the company completely, "The restructuring agreement will wipe out Bain's investment, which the firm has already written down to zero":

      Under the prepackaged bankruptcy deal, Contec lenders, including Barclays, will forgive $180 million of debt for an 80% ownership stake in a reorganized company, said people familiar with the plan. They are also expected to receive $27.5 million in new debt, the people said. A Barclays spokesman declined to comment.

      Barclays is expected to lend Contec an additional $35 million to help keep the company operating during bankruptcy proceedings, the people said. That debt could later convert to the remaining ownership stakes in Contec, they said.

      Lower-ranking creditors owed $160 million are expected to forgive their debt for warrants that could give them ownership stakes, the people familiar with the plan said.

      Barclay's is taking 80% ownership. I guess the other 20% is going to the remaining, lower-ranking creditors.

      For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

      by hungrycoyote on Mon Aug 27, 2012 at 10:16:20 AM PDT

      [ Parent ]

    •  They invested $215mill of their own money (2+ / 0-)
      Recommended by:
      hungrycoyote, DRo

      and then borrowed $180mill using Contec as a collateral. Now Bain decides to flake on their loan obligation and let the bank, Barclay and others, foreclose on Contec.

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