Embattled care home owner Southern Cross has a "reasonable" chance of agreeing a deal to save it, chairman Christopher Fisher said today, even though the company has plunged into the red after a squeeze on revenues.
Southern Cross is locked in negotiations with the landlords of its 750 care homes over a reduction in rents that it says it cannot afford to pay fully any longer. If a deal is agreed, it is thought it could pave the way for a injection of up to £100 million of much-needed funds from new investors.
Mr Fisher said today the firm is in a "critical financial condition" and that all key stakeholders will need to agree on a comprehensive refinancing package. That could mean landlords taking a stake in the firm as well as lowering rents.
Darlington-based Southern Cross, which looks after 31,000 elderly or ailing patients, was recently given until the end of June to agree a deal by its banks.
Losses in the six months to March 31 totalled £311 million, most of which was down to write-offs of almost £268 million on past acquisitions and property.
Underlying operating losses in the year to March were £6.8 million against a £15 million profit last time, reflecting a "progressive squeeze" on its revenues over the past year.
Justin Bowden, national officer of the GMB union, which represents staff at Southern Cross, said: "The company have 750 care homes with 31,000 elderly and vulnerable residents. The company is seeking rent cuts of 30% from landlords to bring rents down to market levels. Rents are £60 per week per bed or £100 million too high and are unsustainable.
"How much longer must the 31,000 Southern Cross residents, their families and the 44,000 staff suffer the sword of Damocles hanging over their heads before Government steps in and takes Southern Cross by the scruff of the neck and restore confidence and calm?
"The overpaid landlords must be given an ultimatum to accept market rates or Government must intervene."
First-half revenues fell by 3% to £464 million as some councils stopped placing residents with Southern Cross, partly because of its financial problems.
Overall occupancy fell by 3% to just under 87%. Local authority admissions declined by 15%, though there were more NHS referrals and private patients. Councils and the NHS account for 70% of patients.
The talks with landlords are based on a temporary 30% rent deferral, to come in from June, before a longer-term deal that could see some form of rent-for-shares swap.
Up to 200 homes could close with patients moved to other premises, reports at the weekend said.
Failure to agree a deal with the landlords and lenders will force the group to seek "alternative finance" to continue to trade, it added.