Four Seasons owner of 58 care homes in Northern Ireland faces collapse
Fears are rising that Four Seasons, which has 58 care homes in Northern Ireland, is heading for administration as hopes of a rescue deal for the debt-stricken group fade.
The company, which has around 3,000 beds here with an average occupancy level of 90%, is said to be struggling under £525m of debt and faces a critical interest payment on Friday.
Owned by Guy Hands' private equity vehicle Terra Firma, Four Seasons - which is the UK's second biggest care homes operator - is now likely to miss the payment, plunging into doubt the future of 17,000 elderly residents across 343 homes.
It comes amid a failure by Terra Firma and Four Seasons' principal creditor, American hedge fund H/2 Capital Partners, to thrash out a deal that would avert disaster.
Belfast property developer Mark O'Kane of O'Kane Commercial believes external pressures facing the sector are responsible for the precarious financial position facing Four Seasons, as well as other operators.
He also believes that Four Season's value assets could make its portfolio an attractive sale to investors, meaning little threat to residents during a potential shift of ownership.
He said: "I've had some experience with a similar case with Southern Cross when it went into receivership. None of the residents were displaced.
"The landlords or owners brought in new owners in what was a seamless transfer when one left and another stepped in. I rest assured that it's highly unlikely residents will be displaced.
"The main difference between Southern Cross is its properties were leased, whereas Four Seasons owns a large proportion of those homes, so there is a value on the assets that they own."
He quoted the recent Care Homes Market (CMA) study which revealed staffing issues and inadequate Government support for the industry, adding: "Staffing issues have been ongoing for years. There is a shortage of nurses and homes are having to go to agencies which have higher costs and they have to absorb those prices.
"The CMA report is important because it also says the funding isn't there to fund these homes and in Northern Ireland we are exclusively reliant on state funding."
Terra Firma is urging H/2, run by Spencer Haber, to take full control of the Four Seasons' group before it goes into administration as part of a debt restructuring.
But H/2 has rejected the proposal as the pair disagree over the terms of the restructure and over the ownership of 24 homes, which are subject to a court battle.
Should Four Seasons collapse into administration, it would be the biggest care homes failure since Southern Cross in 2011.
A Terra Firma spokesman said: "There is no reason to put Four Seasons into administration.
"We call on H/2 Capital Partners, who have acquired their debt at a discount since 2015, to stand by its commitment to find a consensual outcome for the benefit of employees and residents and head off the risk of the obvious disruption that administration would trigger."
It was revealed earlier this week that H/2 could be in line to pocket up to £500m from the collapse of Four Seasons.
It is understood that H/2 bought its debt holding in Four Seasons for approximately £256m, while the enterprise value of the care operator is thought to stand in the region of £700m.
H/2 has already received debt interest payments of £50m, meaning that, were the hedge fund to sell the group or its debt on, as some industry experts expect, it could profit to the tune of £494m.
Terra Firma has also accused H/2 of being "unwilling to engage", blocking email addresses and refusing face-to-face meetings.
H/2 has said it stands ready to take control of the care homes group, with Margaret Ford, former chairwoman of rival Barchester, at the helm.