Fri, 31 Dec 2010 | ADMINISTRATION
Southern Cross's landlords are mulling dividing the care homes up as the group faces an uncertain future, which could lead to administration.
Southern Cross, which runs 38,600 beds in 752 care homes, is striving to negotiate a reduction in its rents if not a freeze. It currently has 25 30-year leases that have rents subject to yearly increases with an average of 2.5 per cent. Its total fixed accounting rent charges are £248.3 million per annum.
Rent hikes and lower fees have led to its losses doubling in the past 12 months. Losses of £47.4 million were recorded for the year to 30 September, where for the previous year losses stood at £19.8 million.
It is thought the landlords would be more willing to divide the care homes between rival operators than accept lower rents.
The matter of cross-securitisations within the portfolio would be a hurdle to a separation of well performing homes from the poorer ones as several properties have been used to guarantee loans for others.
Up to 19 Southern Cross care homes are not allowed to take on new residents after receiving a zero star rating from the Care Quality Commission.
Parties including private equity firm Tower Brook Capital have made their interest in purchasing the group known, though bids have not been placed.
The landlords are examining their options and are not expected to take action straight away, it has been reported.
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