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Four Seasons care home operator on brink of administration Four Seasons care home operator collapses into administration
(about 4 hours later)
Care homes operator Four Seasons, which looks after 17,000 elderly and vulnerable residents and employs 22,000 people, is on the verge of administration, with protracted financial rescue talks expected to end in failure. Care homes operator Four Seasons Healthcare has collapsed into administration, sparking anxiety among relatives of its 17,000 residents and criticism from Labour over government funding cuts and the role of financial investors in social care.
More than a year after complex financial talks began between its US hedge fund lender H/2 Capital and its private equity owner, Guy Hands’ Terra Firma, Four Seasons Health Care is thought to be close to appointing administrators. Four Seasons and the sectors’s regulator, the Care Quality Commission, said they did not expect any disruption to residents’ lives, nor the closure of any of its 322 homes, which employ 22,000 people.
Professional services firm Alvarez & Marsal has been lined up to handle the administration, according to Sky News, potentially the biggest financial failure in the care homes sector since Southern Cross collapsed in 2011. The Guardian understands that several potential buyers have expressed an interest in the business, which administrators said they hope to sell before the end of the year.
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Sources close to Four Seasons said the administration would allow the business to be sold and should not affect residents in the group’s 322 care homes. But Four Seasons’ financial failure has raised questions about the long-term future of a firm that has struggled badly under successive owners, Guernsey-based private equity group Terra Firma and Qatar’s sovereign wealth fund.
Labour blamed government funding cuts for leaving up to 17,000 residents facing an “uncertain future”. Industry experts said it could now be taken over and broken up by its largest lender, H/2 Capital Partners, a little-known US property investment group that effectively controls the business.
Barbara Keeley MP, shadow minister for social care and mental health, said: “This is the inevitable consequence of years of underfunding by the Conservative government. Labour criticised the government’s handling of the care sector and questioned the debt-fuelled business model that has become a common feature of the ailing social care sector.
“The cost of austerity cuts is now being carried by the 17,000 older people in Four Seasons care homes who face an uncertain future. Barbara Keeley MP, shadow minister for social care and mental health, said: “The fragility and instability in the care sector is an inevitable consequence of years of underfunding by the Conservative government.
“£7bn has been taken out of the social care system since 2010 and more providers will follow Four Seasons in the years and months to come unless social care is given the funding it needs as a matter of urgency. “But the real price of this instability and underfunding is now being paid by the 17,000 older people in Four Seasons care homes and their families who face an uncertain future.
“While the government is paralysed by indecision on social care, Labour has a real plan to invest an extra £8bn in social care across a parliament, stabilising the system and ensuring that more people can receive the care they need.” “There are major concerns about the debt-driven business models of some companies in the care sector and the role of foreign private equity firms and hedge funds in deciding the future care arrangements for large numbers of vulnerable people.”
The Care Quality Commission, which oversees provision of social care, said there was no immediate cause for alarm on the part of residents and their families. She said Labour would invest an extra £8bn in social care during the course of a parliament to stabilise the system.
The CQC said it was “fully aware of today’s developments and will continue to closely monitor the position. Four Seasons’ group medical director Dr Claire Royston said the administration “does not change the way we operate or how our homes are run or prompt any change for residents, families, employees and indeed suppliers”.
“Our market oversight regulatory responsibility is to advise local authorities if we believe that there will be likely service cessation as a result of likely business failure. We do not believe this to be the case at this time. But company director John Evans, 60, whose 64-year-old wife Marie was admitted to Four Seasons’ Headington care home in Oxford six years ago suffering from dementia, said he was worried, claiming that the quality of care had already deteriorated in recent years.
“We will continue to keep this under review and remain in regular contact with Four Seasons Health Care throughout this process.” Evans cited “poor food, insufficient permanent staff, equipment failures – all signs of a business with no money”.
Despite the assurances, the Guardian understands that there is no immediate prospect of a buyer for Four Seasons, although H/2 Capital Partners, which holds the majority of its debt pile of more than £500m, could bid for it. He added: “The current debacle is a cause for concern but also for hope – that a white-knight purchaser that understand the sector and is not an equity investor, hedge fund or venture capitalist will take over and put in professional management and invest in the business.”
Private equity firm Terra Firma still owns the company’s equity but has effectively ceded control to H/2 and has no representatives on the Four Seasons board. Professional services firm Alvarez & Marsal will manage the administration, the biggest to hit the care homes sector since Southern Cross collapsed in 2011.
The collapse will raise fresh questions about the financial health of Britain’s care home sector and the potential risks it poses to tens of thousands of residents. It comes more than a year after complex financial talks began between H/2 and its owner Terra Firma, run by Guernsey-based investor Guy Hands.
Figures released earlier this year showed that more than 100 care home operators collapsed in 2018, taking the total over five years to more than 400 and prompting warnings that patients in homes that close down could be left with nowhere to go but hospitals. Hands staged an ill-fated £825m takeover of the business from the Qatar Investment Authority in 2012. Terra Firma still owns the shares but has effectively ceded control to H/2 and has no representatives on the Four Seasons board.
UK care home firms are buckling under the pressure of funding cuts, crippling debt and rising costs, according to accountancy firm BDO. H/2, which is controlled by US billionaire Spencer Haber and owns the bulk of Four Seasons’ £525m debt, is understood to be ready to provide funds to keep the business going until its future is resolved.
The Care Quality Commission, which oversees provision of social care, said it was “fully aware of today’s developments and will continue to closely monitor the position”.
It added: “Our market oversight regulatory responsibility is to advise local authorities if we believe that there will be likely service cessation as a result of likely business failure. We do not believe this to be the case at this time.”
Paul Saper, a care homes expert from the LCS charity, said it was likely that H/2 would take ownership of the business and look to break it up.
“It’s not a business that an American property company should be involved in and it’s not a business for someone like Terra Firma,” he said.
“It works for small family businesses who own a few homes and run something very good. It doesn’t suit a big private equity firm to own 20,000 beds and it never will.”
Social careSocial care
Job lossesJob losses
HealthHealth
Healthcare industryHealthcare industry
RegulatorsRegulators
Care Quality Commission (CQC)Care Quality Commission (CQC)
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