H/2 close to rescuing bulk of Four Seasons care homes
Written by Hit Music Radio News on 11/09/2019
An American hedge fund is in advanced talks to buy the bulk of Britain’s second-largest care home operator, paving the way for a two-stage rescue deal that would salvage tens of thousands of jobs.
Sky News has learnt that H/2 Capital Partners is close to striking an agreement to acquire approximately 185 Four Seasons Health Care (FSHC) freehold sites – about 60% of its 320-strong estate.
The deal could be announced as soon as Thursday morning, according to insiders.
If completed, the transaction with H/2 would pave the way for a second transaction encompassing FSHC’s leasehold sites.
In total, the group employs about 22,000 people and provides care for roughly 17,000 residents.
The company’s future has been uncertain for some time, but it was plunged into a profound crisis in April when administrators were called in just over four months ago.
Banking sources said the agreement with H/2 would involve the fund, which is run by financier Spencer Haber, offering a financial guarantee to secure the running of the remaining 135 care homes until a sale process for those sites has concluded.
That would guarantee continuity of care for all of the company’s patients, the sources added.
H/2 has been widely tipped as the most obvious buyer of FSHC given its long-standing position as the healthcare group’s largest creditor.
It has effectively been in control of the company since December 2017, when the owner – Terra Firma Capital Partners – failed to meet a debt repayment deadline.
Since the professional services firm Alvarez & Marsal was appointed as administrator to two of FSHC’s holding companies in April, a number of financial investors have circled the business in the hope of acquiring it for a knockdown price.
These have included Davidson Kempner Capital Management, another hedge fund, and Cheyne Capital, the company’s second-largest bondholder.
Other bidders also registered an interest in Four Seasons, although HC-One, its only larger rival in the UK, was not be among them.
The insolvency has been closely watched in government and by thousands of Four Seasons residents and their families amid concerns about the future funding of social care.
Boris Johnson has pledged to spend billions of pounds on health and social care since becoming prime minister, although a detailed blueprint covering the latter may be delayed until next year.
Four Seasons had been owned by Terra Firma – the private equity vehicle headed by financier Guy Hands – since 2012.
Terra Firma paid £825m for the business, which still carries debts totalling about £730m after years of fruitless negotiations about a restructuring.
In July, the Financial Times reported that the entire group could fetch about £400m, although it was unclear on Wednesday how much H/2 was preparing to pay for the freehold estate.
Its Four Seasons-branded division, which accounts for about 250 sites, is largely funded from the public purse.
Brighterkind, a group subsidiary which has 46 care home sites, is privately funded, while Huntercombe, which provides specialist mental healthcare for adults and children, operates from 23 sites.
Both the H/2 sale and the subsequent transaction will include a combination of homes operating under the three brands.
One source said the second phase of the process could involve a number of smaller purchases.
Terra Firma has been in separate talks to offload a portfolio of 24 Brighterkind homes which are not part of the insolvency process.
A string of deadlines to agree a long-term restructuring of Four Seasons passed before the company’s collapse into administration.
The Care Quality Commission, the industry regulator, has been closely watching events at the company, which come amid a slew of tough financial situations at leading privately held healthcare groups.
Another leading care home operator, Barchester Healthcare, has seen a deal to sell itself to Macquarie, the Australian infrastructure investor, collapse amid political and economic uncertainty in the UK.
Spokespeople for FSHC and H/2 declined to comment.
© Sky News 2019