Care homes operator Four Seasons suffers 39% drop in earnings
Britain's biggest care homes group Four Seasons has reported a massive 39% fall in annual earnings to £38.7 million, and the debt-laden company's private equity owner has begun talks with its lenders to secure the firm's future.
Four Seasons, which houses 20,000 elderly residents across 450 homes, has been stung by a cut in local authority fees and rising costs, and faces a further hit with the introduction of the national living wage.
It is also saddled with £525 million of debt and faces interest payments of more than £50 million a year.
Owned by City financier Guy Hands's private equity vehicle Terra Firma, the company said it is exploring all options for the business.
Four Seasons chairman Robbie Barr said: "The group has adequate financial resources and liquidity for the medium term, (but) I recognise that the group's capital structure is not suitable for the long-term needs of the business. Options are now being explored."
The options thought to be under consideration include refinancing the debt, a sale or a debt-for-equity swap with lenders.
Industry experts have suggested that a debt-for-equity swap is the most likely outcome.
Mr Barr said a "financing solution for the group" will be announced before the end of the year.
Mr Hands is best known for his 2007 takeover of EMI, the record label that signed The Beatles. The deal ended in disaster when he was forced to hand the business over to lender Citigroup four years later.