Fears of £600m debt from Bupa care homes deal
THE bidder hoping to snap up 150 Bupa care homes may load itself with £600m of debt, analysts have warned.
Private equity-backed HC-One could be left with the debt mountain after the deal – which would see it become Britain’s biggest care-home provider.
But the huge burden has raised the spectre of the collapse of heavily indebted Southern Cross care home operator in 2011.
The private firm left more than 31,000 vulnerable people at risk when it went bust amid a slump in the property market.
Controversial Labour party donor Dr Chai Patel formed HC-One to take over many of the homes from the crisis.
He has reportedly agreed to pay up to £450m for 150 care homes from Bupa. But if the deal is financed through borrowing, as a recent big purchase by his firm is thought to have been, debt could reach £600m when the cost of the deal is added to existing debts of £286.8m. That would leave the homes facing millions of pounds in interest payments before they can break even.
There is huge pressure on social care financing. It follows a University of Manchester report last year criticising the level of debt at Britain’s biggest care home owners who were promising strong returns to investors. Their complicated financial arrangements were unsuitable for social care, it added.
Nick Hood, a social care finance expert and senior advisor at Opus Business Services, said yesterday: ‘The leading healthcare providers dominate the market and they are carrying extraordinary levels of debt. It’s dangerous to have that much debt and it also means they don’t have the money to invest in providing the better quality service or the extra capacity.
‘It’s no wonder there are not enough residential care beds, because the money is all going to pay interest.’
He added: ‘I think the Government should be looking very closely at the financing of the sector and if necessary should be prepared to act.’
In 2014 HC-One’s parent company, property investment company NHP, was bought by investment firms Formation Capital and Safanad for £477m. In its latest annual accounts for the year ending September 2016, the firm said it made a loss of £3.5m.
Patel, 62, former chief executive of upmarket care provider The Priory, was embroiled in the cash-forpeerages scandal in 2014.
In July HC-One secured £286m loan financing from controversial hedge-fund OchZiff, Citibank and Deutsche Bank. It is investing around £100m in refurbishing its facilities. Bupa announced it would be selling its care homes in 2015, complaining of huge financial pressures amid cuts to government spending. HCOne declined to comment.