Southern Cross to start lower rent payments

The owner of about 750 care homes will pay nearly a third less rent than it is obliged to for the next four months. The cut – which is effectively a loan from its landlords – will be repaid when it is able to do so.

The company, which is struggling with a £230m annual rental bill, also has until the end of the four-month period to agree a deal with its lending banks.

Southern Cross recently warned it was in a “critical financial condition” as it unveiled a £311m loss in the six months to March 31.

As Southern Cross struggles with rising rent bills, it is also facing declining local authority fees as fewer councils placed residents with the company.

Local authority admissions declined by 15 per cent in the first half of its financial year, though there were more NHS referrals and private patients.

Councils and the NHS account for 70 per cent of the company’s patients.

Darlington-based Southern consequently saw revenues drop 3 per cent to £464m in the first half, as overall occupancy declined by 3 per cent to just under 87 per cent.

The ongoing negotiations include a potential longer-term rent cut and disposals of some homes.

Some landlords, particularly those which are care home operators themselves such as Four Seasons, could choose to take back some of Southern’s homes.

It has also been reported that up to 200 homes could close with patients moved to other premises.

The Association of Directors of Adult Social Services over the weekend moved to reassure residents and their relatives that it would help Southern Cross get back on its feet.

ADASS President Peter Hay said: “As councils buying care from Southern Cross, we are willing to work with all parties to support the recovery of the business.”

The group later confirmed the rent deferral will run up until September 30.

Southern Cross said it was confident a “critical mass” of landlords will support restructuring plans which will be drawn up over the summer.

Christopher Fisher, chairman of Southern Cross, said: “We believe that all of the key stakeholders in Southern Cross want this restructuring to succeed.

“We are in dialogue with the Department of Health, our lenders and landlords and they continue to support the process.

“Those landlords that do not want to take part in the longer term restructuring will be able to review other options but it is in everyone’s interests if this is as part of a larger, managed and orderly process.”