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Care Home sector on the brink as Four Seasons and NHP face sale if debt restructuring fails
- By Dave Tug
- Published 06/22/2009
- Real Estate
- Unrated
Dave Tug
Internet marketer with a passion for sharing information online.
View all articles by Dave TugCare Home sector on the brink as Four Seasons and NHP face sale if debt restructuring fails
Lenders to Four Seasons Healthcare, the heavily indebted care homes group, are considering a last-ditch plan for a restructuring that would about halve its £1.5billion debt. If there is no agreement, the company will be sold.
Four Seasons has been at a centre of a battle between creditors for more than a year over the terms of a restructuring. Four Seasons, is a 440-site nursing home, elderly care and specialist mental healthcare operator. It's buyout by Three Delta , the Quatari government backed investment fund used a financial structure daring even by pre-credit crunch standards. Three Delta borrowed 14 times the company's turnover from Credit Suisse, but put in as little as £50million of its own money. About £600million of the loans used to buy properties were repackaged into bonds, called CMBS. They will be unaffected by the negotiations, but will need to be refinanced or restructured by 2010. The situation has been watched as a potential precedent for the restructuring of companies with complex debt financing linked to property.
The move comes as some of the 30 lenders involved lose patience, and fears grow that the uncertainty around the company’s finances could start to affect its performance.
The so-called special servicer of the loans (who represents the interests of senior creditors and has the power to sell the company) put forward a proposal on Wednesday for a debt-for-equity swap, according to people close to the process.
All the senior creditors and at least 75% of junior creditors have to agree to the deal by July 6 or the company will be sold. A sale would wipe out many of the lenders, as recent valuations have put the company’s worth at between £700million and £900million because of falling property prices. It brought in Deutsche Bank in May to advise it on options, including a possible sale.
There has been interest from the owners of the Priory Group and private equity firm Advent, according to one of the people.
Royal Bank of Scotland, Nationwide and Fortis are among a group of senior lenders who would own 50% of its equity in exchange for writing off debt.
A group of funds that have been at the centre of negotiations, which include Marathon Asset Management, Cheyne Capital and a fund controlled by Morgan Stanley, would have their debt claims exchanged for a stake of about 12%. Junior creditors holding so-called payment in kind loans, which include hedge funds and RBS, would get a stake of up to 12% in exchange for writing off more than £200million in loans.
NHP, the care home property portfolio company, whose buy-out used similar complex structured financing, is also in negotiations over the restructuring of more than £1billion of loans that have been in default since November. The Group currently owns nearly 300 care homes, with more than 11,500 beds, throughout the UK, making it one of the country's largest owner of private care beds.
Four Seasons has been at a centre of a battle between creditors for more than a year over the terms of a restructuring. Four Seasons, is a 440-site nursing home, elderly care and specialist mental healthcare operator. It's buyout by Three Delta , the Quatari government backed investment fund used a financial structure daring even by pre-credit crunch standards. Three Delta borrowed 14 times the company's turnover from Credit Suisse, but put in as little as £50million of its own money. About £600million of the loans used to buy properties were repackaged into bonds, called CMBS. They will be unaffected by the negotiations, but will need to be refinanced or restructured by 2010. The situation has been watched as a potential precedent for the restructuring of companies with complex debt financing linked to property.
The move comes as some of the 30 lenders involved lose patience, and fears grow that the uncertainty around the company’s finances could start to affect its performance.
The so-called special servicer of the loans (who represents the interests of senior creditors and has the power to sell the company) put forward a proposal on Wednesday for a debt-for-equity swap, according to people close to the process.
All the senior creditors and at least 75% of junior creditors have to agree to the deal by July 6 or the company will be sold. A sale would wipe out many of the lenders, as recent valuations have put the company’s worth at between £700million and £900million because of falling property prices. It brought in Deutsche Bank in May to advise it on options, including a possible sale.
Royal Bank of Scotland, Nationwide and Fortis are among a group of senior lenders who would own 50% of its equity in exchange for writing off debt.
A group of funds that have been at the centre of negotiations, which include Marathon Asset Management, Cheyne Capital and a fund controlled by Morgan Stanley, would have their debt claims exchanged for a stake of about 12%. Junior creditors holding so-called payment in kind loans, which include hedge funds and RBS, would get a stake of up to 12% in exchange for writing off more than £200million in loans.
NHP, the care home property portfolio company, whose buy-out used similar complex structured financing, is also in negotiations over the restructuring of more than £1billion of loans that have been in default since November. The Group currently owns nearly 300 care homes, with more than 11,500 beds, throughout the UK, making it one of the country's largest owner of private care beds.
