BRITAIN’S BEST FINANCIAL SECTION BEGINS ON PAGE 87
Huge debt at key operator prompts calls for help from Government
BRITAIN’S care home industry is on the verge of a catastrophic funding crisis with dire warnings that the Government needs to urgently pump in an extra £1.5 billion to stabilise the sector.
Industry insiders told The Mail on Sunday the crunch may come within the next 18 months as the cost of operating homes escalates and care fees paid by local authorities continue to fall short.
One of the industry’s biggest operators, Four Seasons, has been described by experts as ‘the canary in the coal mine’ as the cash crisis grows.
The company is aiming to finalise an emergency agreement with creditors this month to make its huge debts more manageable.
Sources say Four Seasons hopes to pin down a ‘standstill agreement’ after its owner Terra Firma admitted that the care group could no longer afford to pay interest on its debt.
A deal would allow Four Seasons to bypass a December 15 deadline on payments and press ahead with a plan for Terra Firma to write off debts while putting in £136million of backing in the form of property assets.
Analysts including rating agency Fitch have described Four Seasons’ debt as ‘excessive’.
Industry sources played down the prospect of closures at Four Seasons. But one executive working in the care sector said: ‘There is no doubt a wider crisis is close. It’s 12 months to 18 months away for some operations. But if there is a bad flu outbreak this winter that puts pressure on the NHS and care homes, it may be upon us sooner.’ HC-One, the country’s biggest care home operator, is owned by Labour party donor Chai Patel.
A spokesman for the company said: ‘We are disappointed at the continued lack of action from Government to address the severe financial strains on the wider social care sector. There is no question it is on the edge because of a lack of sustainable funding.’ Many residents of care homes have their fees paid from the public purse by local authorities and these payments are falling short by an average of about £100 per person per week. William Laing at health care research specialist LaingBuisson said: ‘Four Seasons is the canary in the coal mine. There is an annual shortfall in fees of about £1.5 billion.’ That sum would take funding to ‘viable, sustainable levels’. Laing said it was unlikely the Government would act unless it was forced to do so as a result of people being turfed out of care homes and put on the street. Rachael Maskell MP, who is on the All Party Group for Ageing and Older People, said: ‘There is an urgent issue that needs to be addressed. ‘The Government is not putting enough security around the care sector. One big care company going down will break the whole system.’ Sources familiar with the situation said Terra Firma, run by private equity baron Guy Hands, had ‘made mistakes’ over the financial structure. But Four Seasons insists its homes are well run despite diminishing returns. Four Seasons chairman Robbie Barr said last night: ‘The capital restructuring we have proposed will provide certainty and continuity for our residents, patients and employees.’ He added it would not lead to any closures and would lift the financial pressure on its homes.