Chairman steps down as Southern Cross retrenches

The chairman of Britain’s biggest care homes operator has stepped down as the group braces itself for an “intense” period of restructuring talks.

Ray Miles, who has been chairman of Southern Cross for three years, has handed the reins to non-executive director and former Lazard investment banker Christopher Fisher, who will now oversee the company’s battle for survival.

Southern Cross, which has some 37,000 residents in more than 750 homes, is preparing a restructuring plan in a drive to reduce its rent burden and stave off an impending breach of banking covenants.

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The embattled group, which has more than 60 care homes in Yorkshire, owns the Southern Cross Healthcare and Ashbourne Senior Living brands.

The group said the uncertainty over its future had placed further strain on its trading performance.

Southern Cross has been squeezed in recent months as councils and primary care trusts, which pay for more than 70 per cent of its customers, demand rate reductions, while its rents have risen.

The Darlington-based firm, which has denied reports that it approached the Government to ask for a bail-out, said its lenders remained supportive.

Mr Miles said it was the right time for him to leave.

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“Given that my own experience has mainly been building businesses and improving their operational performance and that the company now faces a period of intense financial restructuring, it is time to hand over to others with more experience of this,” he said.

Mr Fisher has spent most of his career at Lazard, the investment bank, where he was a managing director, and has also served as vice chairman of corporate finance at KPMG.

He said the board would focus on supporting chief executive Jamie Buchan as he leads the restructuring talks.

Earlier this year, Southern reported that occupancy in the three months to December 31 was down to 87.6 per cent from 90.7 per cent a year earlier following a decline in admissions of elderly residents by local authorities.

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Its poor start to its financial year came after annual losses for the year to September 30 more than doubled and prompted the company to appoint KPMG to help it negotiate with landlords and lenders.

The company, which ended takeover talks with an unnamed bidder last month, is on the hunt for new capital. The group will shortly make proposals to its landlords on the potential restructuring of its rent payments.

“While there can be no certainty as to the success of these negotiations, the prevailing mood appears constructive,” the company said.

The GMB union warned the group’s 37,000 residents faced homelessness if Southern were to be forced into administration.