Care home provider ‘will not go into administration’

Ailing care home provider Southern Cross Healthcare is confident it can avoid going into administration as it holds talks with the landlords of its care homes in a bid to reduce rents.

By Jeremy Dunning on March 18, 2011 in Adult safeguarding, Adults, Older people, Residential care

Ailing care home provider Southern Cross Healthcare is confident it can avoid going into administration as it holds talks with the landlords of its care homes in a bid to reduce rents.

The claim follows news that government officials have held talks with the provider to ensure its 31,000 residents are not put at risk, after Southern Cross described its rent burden as “unsustainable” earlier this week.

The group, which has 750 homes, believes it will be able to reach an agreement within three months and has stressed that no residents will have to be rehoused.

Spokesperson Ben Brewerton said: “We continue to operate as normal and continue to make as priority the care of our residents. They won’t see any changes in the way the care is delivered.”

“We don’t believe we will go into administration because we believe we will be able to do a deal,” he added.

Its position is being backed by market expert William Laing, director of Laing and Buisson, who said it would be in landlords’ interests to do a deal.

“The landlords would have to let the homes to another tenant and presumably would take a rent cut in order to do that. That’s a leverage that Southern Cross has over the landlords,” he said.

The company announced a decline in its trading position earlier this week and warned it might break its banking covenants – its agreements with creditors over its borrowings – following spiralling rents on its homes and a decline in fees from councils.

The company’s share price has tumbled from 15.75p a week ago to 5.6p yesterday; this time last year it was £1.37. The group now has an estimated market value of less than £12m, compared with more than £1.1bn in 2009.

Consultants KPMG has also been drafted in to accelerate talks with both Southern Cross’s landlords and its lenders, which the company hopes will be concluded by the end of June.

Two main landlords are NHP Ltd and London and Regional Properties, who between them own 50% of the properties. Health and social care provider group Four Seasons Health Care also own some properties.

Brewerton said: “What we’ve said to the landlords is, ‘the situation is serious; we aren’t sure you quite realise how serious the situation is and it’s now time to negotiate to create a long-term viable structure’. They can’t afford for Southern Cross not to pay their rent.”

Care services minister Paul Burstow said: “We know that the events and speculation of recent days could be distressing and stressful for those involved. We will continue to keep in close touch with the situation and will work with local authorities, CQC and others to ensure there is an effective response, which delivers protection to everyone affected.”