Home debt claims are ‘scaremongering’

Four Seasons - which took over the Eglinton care home on Friday - said doubts cast by GMB over the operator’s ability to pay £750m in debts by next September was “irresponsible scaremongering that will cause unnecessary worry to elderly residents and relatives and to employees.”

Last week the Sentinel reported how two new operators have applied to take over three former Southern Cross care homes in Londonderry which collectively house upwards of 100 residents.

One of these, Four Seasons, applied on September 20 to be registered as the new operator of Longfield Care Centre and officially took over the facility on Friday.

The move was forced after Southern Cross’ 2007 decision to list itself on the London Stock Exchange, sell most of its property freeholds and then lease them back, ultimately prompted the erstwhile car provider to announce its impending closure earlier this year.

Now GMB has called on the Care Quality Commission (CQC) to investigate the transfer of Southern Cross homes to Four Seasons across the UK - ultimately 145 are due to change hands - to establish how Four Seasons has the financial stability to avoid being the “son of Southern Cross.”

Justin Bowden GMB National Officer said: “The CQC must establish how Four Seasons can pay debts of £750m due to be repaid next September from assets of £350m. Four Seasons have to use income from residents and local councils meant to care for the residents to pay interests on these enormous debts.

“The only apparent option for Four Seasons to pay back the £750m is to use public money meant to care for the elderly. This is totally unacceptable. Councils must ensure taxpayers funds are not used to prop Four Seasons or any other financially unstable care home operator.

“We must warn families that the scene is set for Four Seasons Healthcare, and some other operators, to go the way of Southern Cross.”

But Four Seasons accused GMB of “irresponsible scaremongering” and said it was “substantially wrong” in its assessment of the situation.

“Four Seasons is in good financial health. Unlike Southern Cross it is trading profitably with EBITDA (earnings - before interest, taxes, depreciation, and amortization) at circa £100 million.

“The company continues to outperform the market with occupancy at 88 per cent. This is very significantly higher than average occupancy across Southern Cross homes. Our admissions are up compared to last year in contrast to a decline across the sector,” a spokesperson for the group stated.

The spokesperson said Four Seasons had a carefully considered and healthy balance of homes in terms of ownership and leasing and thus was not as critically exposed to rents as was Southern Cross. Four Seasons also expects to have grown its capacity by 40 percent by the end of this year.

“The company successfully completed a £1.5 billion capital restructuring with circa £780 million swapped for equity and maturity of the remaining debt extended to September 2012 giving a stable capital structure.

“It is well able to manage this level of debt and is reviewing options for permanent resolution of the remaining debt. Our debt and equity holders are supportive and the board is very confident this will be achieved next year before the maturity date,” the spokesperson stated.

“The GMB is substantially wrong about the company assets. The current valuation of our properties and business is a multiple of the figure the GMB quotes. In their statement they quote a net asset figure and subsequently ask how can we pay back a debt out of this, apparently without grasping that net assets are what remains after debts.

“They also fail to understand or choose to ignore that restructuring the debt repayment terms may be a more appropriate option than repaying it outright from assets. Importantly, there is no question of public money being required to prop up the company,” the spokesperson added.

Welcoming the transfer of the former Southern Cross homes on Friday Chief Executive Officer of Four Seasons Health Care, Dr Peter Calveley said: “These homes are an important strategic addition to our organisation and significantly increase our capacity and regional cover.

“They represent a good fit with our existing homes portfolio. I am pleased to welcome the Southern Cross employees and residents to the Four Seasons Health Care Group.

“We have been working closely with Southern Cross managers over recent week to ensure the transfer of homes would take place with no disruption to care services.”

Last month Southern Cross promised one hundred and forty one residents housed in care homes in Londonderry - forty-five live in the Longfield Care Centre, 53 in the Culmore Manor Care Centre, and 43 in the Greenhaw Lodge Care Centre - and the staff that care for them would not be affected by any transfer.

Longfield is the only car home transferring to Four Seasons. Another company Orchard Care Homes applied on September 15 to be registered as the new operator of Culmore Manor Care Centre (home to 53 at the end of June) and Greenhaw Lodge Care Centre (home to 43 at the end of June).

Orchard also applied on the same date of September 15 to take over two former Southern Cross homes in Strabane - Melmont Manor and Sperrin.