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Monday, August 27, 2012
Contec Holdings, Bain-Owned Firm, Could File For Bankruptcy As Early As This Week
A company owned by Bain Capital may file for bankruptcy this week, the very week that Bain’s former CEO Mitt Romney is slated to accept the Republican nomination for president, according to theWall Street Journal.
Bain bought Contec, a company that repairs cable equipment, in 2008, after Romney left the firm. As part of the deal, Bain reportedly saddled Contec with about 60 percent debt -- a relatively small level of debt compared to other leveraged buyouts -- but it was too much for Contec to survive the financial crisis and a drop in cable subscribers.
The bankruptcy is just the latest painful chapter for the company. Three summers ago, Contec laid off more than 100 employees and moved production to Mexico, according to the Albany Times Union.
Romney’s tenure at Bain, and the private equity firm’s strategy of buying up companies, has been a point of controversy during the campaign, so news that one of Bain’s companies may be filing for bankruptcy during the Republican National Convention likely won’t help. Bain has been criticized for pushing profitable companies into bankruptcy and for forcing layoffs at struggling firms.
For his part, Romney has said that his experience running Bain prepared him to reinvigorate the nation's economy. He argued that his time spent turning around less-than-successful companies would help him “as president to fix our economy, create jobs and get things done in Washington,” in an op-ed in the WSJ earlier this month.
Still, the stories of some of those turnarounds have been a flashpoint for controversy on the campaign trail. After Bain acquired medical company Dade International as part of a Romney-approved deal in the 1990s, the company more than doubled its sales and brought Bain a huge return on its investment, The New York Times reports. But the boost came at a cost; Bain encouraged Dade to take on more debt, a move that accelerated its path towards bankruptcy. The company also laid off 1,700 workers.