Vunerable At Risk As Care Home Chain Could Face Collapse
A care home chain with a raft of local authority contracts is in emergency talks to restructure its £1.5bn debt.
Four Seasons, which owns and manages more than 400 care homes, is negotiating for more time with its creditors in order to reach a ‘standstill’ agreement. It is believed to be the third extention to the company.
It provides care to around 21,000 people across the full spectrum of services from older people to children and people with mental health problems.
At its core are contracts with local authorities and PCTs as well as private care with individuals.
Four Seasons is understood to have earnings of around £100m a year and is making an operating profit.
The company, which has been in negotiations since August, is understood to be working with 35 lenders to restructure its debt.
Its biggest lender is troubled Royal Bank of Scotland (RBS) which is understood to have set a deadline of July to resolve its current difficulties.
Problems began in August last year when its previous owner, the Qatar Investment Authority, broke off negotiations.
The Four Seasons board has also rebuffed an offer from the rival Priory Group which is owned by RBS.
City experts predict that Four Seasons will opt for either a sale or a debt for equity swap. They value the company at around £800m.
Should the negotiations stall, creditors could push the firm into insolvency leaving the Government with the nightmare of not only handling another business collapse but ensuring the care of thousands of vulnerable people continues.
Department of Health officials privately voiced concern when a series of care home groups were packaged up and sold to private equity groups at the height of the boom.
Four Seasons was loaded with debt in a ‘whole business securitisation’ in December 2006.
City financiers were attracted to the care market by projections of a growing older population, regular income from PCTs and local authorities plus the value of properties which could potentially be sold to dvelopers.
But the Government has signalled it wants to see more care delivered at home, fees have not significantly increased and property values have collapsed.
This comes on top of funds drying up in the wholesale credit market.
But several private equity firms, including the US giants Blackstones which has bid for the firm in the past, are interested in buying.
A company spokesman said it remained confident a deal could be reached and day-to-day business would remain unaffected: ‘The group continues to generate significant operating profits and it is in everyone’s interests to preserve the underlying value of the business.’