GMB warn on Four Seasons

30 September 2011

Of the 288 Southern Cross care homes transferred today the 57 going to Four Seasons healthcare are "jumping from the frying pan into the fire" says GMB.

The Care Quality Commission must establish how Four Seasons can pay debts of £750m due to be repaid next September from assets of £350m as Four Seasons have to use income meant to care for the residents to pay interests on these enormous debts.

Four Seasons Healthcare are taking over 57 of the Southern Cross care homes being transferred today in wave one of the transfer of all the homes to over 30 new operators. In total 145 Southern Cross care homes will transfer to Four Seasons Healthcare. GMB the union for staff at these homes say that this is like “jumping from the frying pan into the fire” as Four Seasons Healthcare is saddled with debts of £790m and has no other income except money to care for residents to pay them. See notes to editors 2 for list of homes due to be transferred with a tick for those transferring today.

GMB has called on the Care Quality Commission (CQC) investigate this transfer to establish how Four Seasons Healthcare has the financial stability to avoid being the 'Son of Southern Cross'.

Four Seasons Healthcare is from the same private equity background as Southern Cross which is due to go into administration at the end of October 2011.Four Seasons Healthcare owes debts of £790 million which are due to be repaid in September 2012 and has net assets of £350 million.

Four Seasons Healthcare currently operate over 420 care centres and nursing homes accommodating 17,500 people and employing over 21,000 staff. In 2008 there was a debt for equity swap as the then owners QIA walked away. Royal Bank of Scotland took a stake just under 40% and wrote off £300m in loans. Overall, 30 lenders cut debts by over half to £780m which saved it from collapse. See notes to editors 1 for time line. Four Seasons holding company is registered off-shore in the Cayman Islands and in Guernsey.

Justin Bowden GMB National Officer said, “The Care Quality Commission must establish how Four Seasons can pay debts of £750m due to be repaid next September from assets of £350m. Four Seasons have to use income from residents and local councils meant to care for the residents to pay interests on these enormous debts.

The only apparent option for Four Seasons to pay back the £750m is to use public money meant to care for the elderly. This is totally unacceptable. Councils must ensure taxpayers funds are not used to prop Four Seasons or any other financially unstable care home operator.

We must warn families that the scene is set for Four Seasons Healthcare, and some other operators, to go the way of Southern Cross.

The Labour Movement must defend the thousands of residents in care who have worked for and served this country all their lives. If not, then history will repeat itself. If Southern Cross was the original motion picture, Four Seasons are the sequel, and they're coming soon to a town near you.”

Notes:

1 Timeline on Four Seasons Healthcare

· 1989 - Established by Scottish businessman, Robert Kilgour. His first care home launched in Kirkcaldy's former Station Hotel

· 1997 - Joined forces with Hamilton Anstead, MD of Takare PLC

· July 1999 –Alchemy Partners, headed by Jon Moulton, built the group with the acquisition of CrestaCare and Four Seasons Health Care. The deal was worth £133m in total with Alchemy providing £44.5m. Robert Kilgour left the company and Hamilton Anstead remained as sole Chief Executive.

· 2001 – Alchemy provided additional £5.4m to acquire additional care homes.

· 2002 – Alchemy provided additional £25m to enable acquisition of Omega Worldwide and Principal Healthcare

· August 2004 – Sold (through Goldman Sachs) to Allianz Capital Partners (advised by Dresdner Kleinwort Wasserstein) for £775m, significant gain with IRR of 41% and a multiplier of 4.3x. This deal saw 10 senior employees of Four Seasons get £30m. Alchemy made £200m

· 2005 - Hamilton Anstead left the business, Tony Heywood, former boss of Westminster Healthcare becomes Chief Executive

· September 2006 – Sold to a Delta Commercial Property, an investment vehicle for Three Delta and backed by the Qatar Investment Authority, for £1.47bn, with £1.3bn of debt and £100m of equity.

· 2007 - Dr Peter Calveley appointed Chief Executive

· 2008 – £1.24bn of senior debt due on 2 September 2008. The QIA, unable to refinance the debt, write of the value of its equity holding (£100m), effectively walking away. The banks that lent the money wrote off £800m. Hardest hit was RBS who led the consortium of 30 lenders who swapped the debt for a stake in Four Seasons. Others included Nationwide, Fortis, Credit Suisse, Marathon Asset Management, Cheyne Capital, Morgan Stanley, Goldman Sachs. Hatfield Philips International acted as adviser to all of the lenders. One Bondholder is Ignis, the investment management division of Hugh Osmond's Pearl.

· December 2009 – Financial Restructuring agreed to swap debt for equity. Deutsche Bank. Entire share capital of parent company, Fino Propco Holdco Ltd was acquired by FSHC (Guernsey) Holdings Ltd via a direct Jersey subsidiary FSHC (Jersey) Holdings Ltd.

· Currently £750m in debt, occupancy rate close to 90% (according to The Observer), a 2009 report by Four Seasons states £790m of debt and occupancy rate of 87.4%. RBS and funds in which RBS participates are the largest shareholder with about 38% of the group.

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