Private equity managers rejected criticism of their industry yesterday and denied that their financial wizardry had left Britain's biggest care home group teetering on the brink of collapse.
As Southern Cross struggles to meet its rent bill, the company has slashed payments to landlords by 30% for four months, leaving an uncertain future for its 41,000 staff and 30,000 elderly residents, despite a government guarantee that none of them will be thrown on to the street.
Southern Cross operates 25 care homes in Northern Ireland, and is responsible for hundreds of elderly people across all six counties.
Its chairman, Christopher Fisher, warned this week that a third of its 750 homes would have to be sold or closed, to cope with losses of £310m which were reported earlier this year.
At the centre of the controversy is the sale and lease-back of hundreds of Southern Cross care homes in a City manoeuvre called the "opco-propco shuffle".
Under the arrangement, Southern Cross homes were sold to investors in a property company (the propco) that was guaranteed rents for 30 years. Meanwhile, Southern Cross concentrated on caring for the elderly in properties leased from the new landlord, making it the operating company, or opco.
The British Private Equity and Venture Capital Association (BVCA) said: "It is completely false to state that former owner, Blackstone Capital Partners, stripped the property assets out of Southern Cross. It is inaccurate to state or imply that Blackstone created the Southern Cross leases, saddling the company with high rents to the gain of Blackstone and detriment of the company."