City’s misgivings as debts haunt care provider firms
Fears over the viability of the private care sector have been raised after two City-listed providers revealed a debt restructure and pre-tax losses.
Four Seasons Health Care announced it had restructured its £16bn debts after months of torturous negotiations.
RBS bank, which was bailed out by the Government, has written off £300m in exchange for a 40% stake in the business.
In total, a consortium of 30 lenders has agreed to write off half the debt, leaving the firm to carry around £780m in liabilities.
Four Seasons has significant contracts with social services departments, due to the rising number of older people living longer.
But it was sold on by private equity investors at the height of the finance and property boom.
The company revealed its day-to-day business had a value of £100m, with an occupancy rate of 88.5%.
Dr Pete Calveley, chief executive, said: ‘As always, we will continue to be single-minded in our attention to improving our service offering and developing our business.’
Government plans to enable people to live in their homes for longer and flat local authority fees have led City analysts to question long-term returns.
Last week, Southern Cross, the UK’s largest care home operator, revealed a pre-tax loss of £19.8m.
Occupancy rates fell and the lower quality of some of its homes has hit its reputation, together with a rise in labour and administration costs.
But another group Caretech, which specialises in care for adults with mental health and learning difficulties, announced a rise in profits, and a prediction that council outsourcing would boost its balance sheet. Farouq Sheikh, executive chairman, said: ‘We are in the area of non-discretionary spending. The local authority has a legal obligation to assess people, and once it has assessed them, the authority has got to find each individual a package.’