Southern Cross strikes deal with landlords

Ailing care home operator Southern Cross has agreed to work together with its landlords to try to find a future for the group.

At a meeting yesterday (Wednesday) Southern Cross, its lenders and landlords’ committee agreed to work “towards a consensual solution” over the next four months to “ensure that the continuity of care to all 31,000 residents will be maintained.”

The process will be overseen by a restructuring committee made up of representatives of the landlords’ committee and the company.

The company has said that its rent bills are unsustainable, given falls in revenue from councils, prompting it to issue an ultimatum to landlords to accept a 30% cut in rental payments.

This prompted fears that it was about go into administration and put at risk the future care of its 31,000 residents.

Last month, it revealed it made a loss before tax and other charges of £21.1m in the six months to 31 March 2011, compared with a £1.6m loss in the same period in 2009-10.

In addition, it had to write off £293m of assets because of its financial position, while net debts at the company had doubled to £14.4m as of 31 March from £7.3m at the end of September 2010.

Southern Cross chairman Christopher Fisher said this “puts an end to the recent unsettling period of uncertainty for our residents and their relatives.”  

“We thank our landlords for their support and look forward to working with them over the enxt four months to finalise the future arrangements for our homes,” he said.

The Association of Directors of Adult Social Services welcomed the statement but called for more detail on the future shape of the company to help in contingency planning.

“The issue is the important one of confidence, and of ensuring that current residents of Southern Cross homes, as well as people who might be considering buying a place in one for themselves or for a relative, share in that confidence.

“The company operates in a market driven by choice, and unless they respond rapidly in this situation there is a very real danger of their losing business and market share,” said president Peter Hay.

Industry insiders have speculated that it could be reduced from its current portfolio of 750 homes to between 250 to 270 homes with some owners, who also care home operators including Four Seasons and Bondcare, taking back control of their homes and others finding a new operator or staying with a much-reduced Southern Cross.

Industry analyst Paul Saper from LCS International said: “The outlook for the residents and the staff is much improved and anxieties of the residents will be much reduced.”

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