Southern Cross saviour in refinancing of its own

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The Independent Online

Four Seasons Healthcare, the care home chain that is hoping to take on 140 Southern Cross homes, is in discussions to refinance its debts, which amount to £780m.

The group, which last year deferred its deadline to repay the debts by two years to October 2012, is now seeking, in effect, to push back the due date again, by refinancing its borrowings.

Sensitive to the irony of a company taking on homes from a group that collapsed under the weight of its debts, only to struggle with its own borrowings, Four Seasons insisted that it was completely normal to refinance and that the move had always been its intention.

Four Seasons restructured its balance sheet in 2009 in a debt-for-equity deal with creditors which cut its borrowings in half – to about £800m – in return for ownership of the company.

As a result, control of Four Seasons transferred from a Qatari sovereign wealth fund to the creditors, including Royal Bank of Scotland, which took a 40 per cent stake.

Four Seasons has been approved by the Care Quality Commission (CQC) to take over the running of 56 homes previously managed by Southern Cross and is planning to apply to run another 84 homes. However, Justin Bowden, national officer of the GMB union, has likened the transfer of those homes as "jumping from the frying pan into the fire" and called on the CQC to put the deal on hold until it can establish that Four Seasons "has the financial stability to avoid being 'Son of Southern Cross'".

Amanda Gearing, a GMB organiser, said yesterday that Four Seasons plans to refinance heightened concerns that the group "would end up in a similar position as Southern Cross...leaving residents and staff with months more uncertainty."

A spokesman for Four Seasons said yesterday that he was confident the group would be able to refinance its debts by next October.

"The GMB continues to quote a net asset figure and questions how we can repay debt out of this. They have failed to understand that net assets are what remains after debts have been accounted for," he said.

Four Seasons plans to increase the number of beds it offers by 40 per cent in the next three months, in part by taking on the Southern Cross facilities.