Southern Cross’s plans to lead a consensual restructuring of the nursing home operator have come unstuck after the company admitted that all its 80 landlords now wish to “leave the group”. That would mean the existing group would no longer operate any homes.
At the beginning of June the company unilaterally decided to reduce its rent payments by an average of 30% to these landlords. That presumably would have given them the option to repossess their homes through this seeming breach of the original terms of their contracts.
However, it is understood that most if not all landlords are unwilling to put the company in administration, as this would in turn breach the contracts the operator has with local authorities to accept patients.
Now Southern Cross’s restructuring committee, which includes landlord representatives, is formulating a plan “to facilitate the smooth transition of homes to landlords and, where appropriate, their new operators”.
The company added that around 250, or a third of the 752 homes from which it operates, would shortly begin this transition process to nominated new operators. These would primarily be homes owned by existing operators and those who have strong links to such providers of care.
That might include Four Seasons, which owns 43 homes let to Southern Cross.
Plans for the remaining two thirds of homes are currently being finalised with landlords, with further announcements to be made in due course. Several of these landlords will require the company’s “existing operational management and back office functions”.
The group also said it hoped that “all home based staff”, across the portfolio, would be transferred on their current terms.
After the process, which will see landlords, lenders and other stakeholders ideally act consensually, Southern Cross said there would be “little or no value…attributable to shareholders”. The company’s shares were therefore suspended with immediate effect.
Chairman Christopher Fisher said: “We anticipate that the period of uncertainty which we have been experiencing will now draw to a close. We regret the loss of value which shareholders have experienced.”