Friday, May 20, 2011

The NHS & Southern Cross Healthcare: The future is now!!!

The future does not bode well for the NHS if the reform goes ahead. Governments tend to ignore lessons they can learn form the past.

The future is now!!!

Southern Cross, Britain's biggest nursing homes operator, is asking landlords to agree to cut rent by 30% for four months from June in a desperate bid to stave off administration.

A collapse of the group would create a political storm, with Labour MP Michael Meacher saying on Thursday that if the company failed "it would expose the brutal logic of profit-driven private services."

The cash-strapped firm, which used to be owned by the US private equity group Blackstone, emerged with some 750 homes and 31,000 residents after a period of heady growth over the last decade.

But Southern Cross is now struggling to meet a huge rent bill because it offloaded freeholds to raise cash during the boom years. It also faces declining fees from local authorities, which pay for most of the company's residents, as councils grapple with public spending cuts imposed by the government.

Blackstone wants to raise cash from outside investors to fund Southern Cross Healthcare’s further expansion, after spending £510 million of its own money in three acquisitions since 2004.

Blackstone has begun a review of Southern Cross’s future and the venture capitalist has long believed that a flotation would be its most likely means of exit.

A sale to another large provider is thought to be unlikely because competition regulators have previously voiced worries about consolidation, amid concern that
providers can increase prices too easily when they dominate a local market.

The hope is that the City will be keen to invest in Southern Cross because the market for elderly care is growing as people are living longer and financial pressures mean that the NHS is keen to outsource care of the elderly.

………Blackstone first bought into the sector with the £162 million purchase of Southern Cross from West private equity back in September 2004.

Two months later Blackstone bought the publicly listed NHP for £564 million and took on net debts of £524.8 million — and defrayed some of the expense by selling £300 million worth of care-homes property in two deals. At the time of its acquisition NHP — which owned its own estate and that of some competitors — had last reported annual profits of £35.6 million.

The purchase of Ashbourne Group, which provided 10,000 beds in 193 homes, was the last of the three deals. Ashbourne was bought out for £85 million in November 2005, although the company had only a leasehold interest in its property.

The nursing home market has been the scene of frantic consolidation over the past two years as the once highly fragmented market has been consolidated around four main players.

Aside from Southern Cross and BUPA, the other large operators are the Allianz Capital Partners-backed Four Seasons, and Barchester Healthcare, in which the principal investors are John Magnier and J.P. McManus, the Irish horse racing tycoons.

The Royal Bank of Scotland, the biggest debt provider in a lending syndicate of more than 100, has agreed along with other senior lenders to cut the debts of the embattled Four Seasons by more than 50pc to £780m.

In return, RBS's Global Restructuring Group will take control of a 40pc equity stake in the nursing home operator with plans to sell the stake for a profit in three to five years' time.

The debt restructuring of Four Seasons, which cares for more than 15,000 people and employs 21,000 staff, has been one of the largest in Europe caused by the financial crisis. Negotiations have lasted more than a year, costing tens of millions of pounds in fees, after Four Seasons breached covenants last August.

The company was bought by Qatari investment firm Three Delta in 2006. However, it walked away from negotiations after it became apparent that all of the equity had vanished from the over-leveraged group and junior creditors threatened to take control of its assets.

The British taxpayer will own around 40pc of one of the country's largest care home groups.

So David Cameron, if you are listening, U-turn now. These people will just strip assets and many hospitals especially those in London are in prime sites for developers. These people are everywhere. They were in Iceland and at many other banks. Money is their business and not health.

There is much we can learn from the past.


Friko said...

Of course Governments tend to ignore lessons they can learn from the past.

Their own future and interest in the genuine well-being of the population, young and old, is over when they leave government.

They're in it strictly short-term, their vision is strictly short-term.

Cockroach Catcher said...

Thanks Friko. It is getting quite scary. I flip between thinking it is a cockup or a conspiracy and I am not so sure if it was not a conspiracy.

Panic Attacks said...

I agree, they are prime spots for developers. Learning from the past is vital so we can step into the future.

Friko is right, the vision should be long-term.