Southern Cross winds itself up

AILING care home giant Southern Cross yesterday took the dramatic step of announcing it was to wind itself up after failing to reach agreement with its biggest landlords over a restructuring of the company.

Staff and residents at more than 500 homes were left unsure as to who would be running them while shareholders will have their investments in the group wiped out after the company's shares were suspended.

Landlords of 250 homes had agreed to take them back and run them themselves but negotiations are still ongoing with the owners of the other 502, a process that could take three to four months. For some weeks it has been locked in negotiations over a restructuring of property arrangements.

The firm had negotiated a 30 per cent rent cut for four months while the talks continued. And while some landlords had been expected to take back their properties, yesterday's announcement that all had decided to walk away was a surprise.

Last week, Four Seasons, a care home operator that had leased 45 homes to Southern Cross, said it would take them all back and run them while Bondcare, another smaller operator with 40 homes, had already indicated it would take them back under its own control.

The group has 80 landlords but it is understood just eight owners account for 75 per cent of the homes. NHP and London & Regional are the two largest landlords but have yet to reveal their plans. It is thought NHP, struggling under debts of 1.1 billion, and London & Regional, with debts of 330 million, have little room for manoeuvre.

The GMB union yesterday claimed that 336 of the care homes due to be taken back are owned by companies outside the UK, with 325 of them registered in tax havens.

GMB national officer Justin Bowden said: "For Southern Cross's 31,000 residents and 43,000 staff this looks like a case of 'out of the frying pan, into the fire'.

"These 80 landlords are a rag-bag bunch whose number includes overseas interests, tax dodgers and, in some cases, 'identity still unknown'."

Chief executive Jamie Buchan is to lead the restructuring and Southern Cross said he will work closely with all interested parties to ensure "that the welfare of residents and staff is maintained".

Southern Cross said that, to ensure continuity of care to residents, all payments to trade creditors are to be maintained and all home-based staff transferred on their current terms.

A spokesman for Prime Minister David Cameron said "no-one will be left homeless as a result of this".

Both Buchan and chairman Christopher Fisher will face a rough ride at a meeting for shareholders today. At its 2007 peak, the group was worth 1bn.