Four Seasons care homes group to report earnings fall of up to 34%
Britain's biggest care homes group Four Seasons is poised to report a massive fall in earnings of up to 34% as the company's creditors prepare to begin negotiations over a potential debt for equity swap.
It is understood that annual earnings at Four Seasons, owned by private equity giant Terra Firma, could plunge by as much as 34% to £42 million when it releases results next week.
The company, w hich 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.
To compound matters, Four Seasons is struggling under £525 million of debt and faces interest payments of more than £50 million a year.
"It's come to a point where creditors are looking at ways to turn the company around and recover some of their money. One of those routes is a debt for equity swap," a source with knowledge of the matter said.
One of Four Seasons' biggest creditors includes US investment fund HCP, which is considering a number of options including proposing waiving some of its debt in exchange for equity.
Terra Firma is controlled by City financier and Guernsey-based tax exile Guy Hands, and Fours Seasons' debt is linked to his £825 million takeover of the firm in 2012.
Credit ratings agency Standard & Poor's has warned that Four Seasons will run out of cash by June unless it undergoes financial restructuring.
To this end, Four Seasons has enlisted the services of PJT Partners and Allen & Overy to assess its options.
A Four Seasons Health Care spokesperson said the firm has "medium term" finances for its needs, adding: "As we have previously said, we have appointed advisers to help us enhance the group's financial flexibility.
"Quality and standard of patient care is our highest priority and we can't envisage any scenario that would have any effect on the quality of care for residents in our homes or patients in our specialist care units."
Hands is best known for his 2007 takeover of EMI, the record label which signed up the Beatles. The deal ended in disaster when he was forced to hand the business over to lender Citigroup four years later.