Financial restructuring bid by care home firm

Britain’s second biggest care homes operator has put forward proposals for a partial debt for equity swap as part of a major restructure aimed at putting the group on a secure financial footing.

Four Seasons Health Care, owned by private equity vehicle Terra Firma, is in discussions over plans that would see its lenders take control of a 20% stake in the group in exchange for waiving some of their debt.

The company, which is struggling under a £525 million debt mountain and faces interest payments of more than £50m a year, is also proposing to restructure its borrowings.

Under the new scheme, not only will the group’s debt be reduced by £115m, half of the interest payments on £350m of its borrowings will have the option to be rolled up and paid as a lump sum in 2021.

Four Seasons would bundle 24 profitable homes into its core business in order to beef up the security on its loans.

The firm, which operates properties in Tayside and Fife among its 335-strong care home portfolio, has seen its financial performance deteriorate in recent years.

It has been stung by a cut in local authority fees, rising costs and the introduction of the national living wage and the group has continuously warned over its long-term stability.

As part of efforts to ease the pressure, Four Seasons is also in discussions with landlords over lease renegotiations on some of its care homes.

Justin King, the former Sainsbury’s chief executive who is now vicechairman of Terra Firma, said: “The proposals on debt, if agreed, will give the business the secure financial footing it needs to continue the good progress made by management in the last two years.”

Justin King, vicepresident of Four Seasons owner Terra Firma.