Troubled Southern Cross to close

The cash-strapped operator, which has 752 homes and 31,000 residents, is to close after landlords refused to restructure rental agreements.

Landlords of 250 homes have agreed to take them back and run them themselves but negotiations are still ongoing with the owners of the other 502, a process that could take three to four months, it is understood.

The firm said final details of the plan have yet to be settled but all payments to trade creditors and staff are to be maintained to help with the transition to new owners or operators and keep continuity of care.

Southern Cross is the UK’s largest care home operator but ran into a financial crisis brought on by a rising rent bill and lower fees as occupancy rates declined and local authorities reduced the number of patients they placed with the group.

For some weeks it has been locked in negotiations over a restructuring of property arrangements.

It negotiated a 30% rent cut for four months while the talks continued but though some landlords had been expected to take back their properties, today’s announcement that all had decided to walk away was a surprise.

Last week, Four Seasons, a care home operator that had leased 45 homes to Southern Cross, said it would take them all back and run them while Bondcare, another smaller operator with 40 homes, had already indicated it would take them back under its own control.

The group has 80 landlords but it is understood just eight owners account for 75% of the homes. NHP and London & Regional are the two largest landlords but have yet to reveal their plans.

The GMB union today claimed that 336 of the care homes due to be taken back are owned by companies outside the UK, with 325 of them registered in tax havens.

GMB national officer Justin Bowden said: “Southern Cross may be on its last legs but for Southern Cross’s 31,000 residents and 43,000 staff this looks like a case of ‘out of the frying pan, into the fire’.

“These 80 landlords are a rag-bag bunch whose number includes overseas interests, tax dodgers and, in some cases, ‘identity still unknown’.”

Chief executive Jamie Buchan is to lead the restructuring and Southern Cross said he will work closely with all interested parties to ensure “that the welfare of residents and staff is maintained”.

“The process that we’ve embarked upon now for some months, maintaining continuity of care, will be achieved and all our landlords, our lenders, our creditors, have been very supportive of a process which delivers that outcome,” chairman Christopher Price told the BBC.

Both he and Mr Buchan potentially face a rough ride at a general meeting for shareholders tomorrow after shares were suspended today and the company said there will be nothing left for investors once the restructuring is completed. At its 2007 peak, the group was worth about £1 billion.

Prime Minister David Cameron’s official spokesman told reporters: “On the issue of Southern Cross, we have said all along that no-one will be left homeless as a result of this.

“Local authorities have a duty to ensure that people get appropriate care.

“There are currently around 50,000 spaces available across the country so there should be no reason why anyone will be out on the street.”

But he stopped short of giving an assurance that all Southern Cross residents would be able to remain in their current homes, saying only: “We want to minimise the disruption to anyone who might be affected by this.”

Shadow health secretary John Healey said: “This announcement is what those living in Southern Cross-owned homes have feared for weeks. While the company offers reassurances, residents and their families must now hear from ministers what action they are taking to guarantee nobody ends up on the street or is left with inadequate care provision.

“Many other people in private residential care will also now worry about the future, and Southern Cross raises serious questions about David Cameron’s plans to turn healthcare into a full-scale market.”