Southern Cross landlords face tough decisions

LANDLORDS of struggling Southern Cross may have to compromise further on rents as new operators will only "cherry pick" the best homes, a Scottish care home entrepreneur has warned.

Tony Banks, owner of Balhousie Care Group, has been in talks with landlords about taking on some of Southern Cross' leases north of the Border after Britain's largest care home operator said it could no longer afford its 230 million-a-year rent bill.

Banks estimated that least half of the company's 751 homes would have to be transferred to new operators after landlords extended a lifeline to Southern Cross and agreed to take a 30 per cent cut on rent payments for the next four months.

But he said many of the homes were in need of capital expenditure and any leases with other companies would have to reflect that.

The plans will be tabled in a meeting today with the government and the company's main lenders, including Barclays and taxpayer-backed Lloyds Banking Group.

The banks would not comment on the possibility of writing off any debt ahead of the meeting, in which landlords are expected to ask them and their own lenders to "share the pain" of rescuing the operator.

It is hoped that HMRC will also be supportive over the 20m it is owed by Southern Cross.

The proposals will allow landlords to take their care homes back from Southern Cross and either run them themselves or find other operators.