Guy Hands' Terra Firma proposes a refinancing for struggling Four Seasons Health Care

Lucy White
Guy Hands' firm Terra Firma bought FSHC in 2012

Ailing care home group Four Seasons Health Care (FSHC), owned by private equity firm Terra Firma, has announced a financial restructuring aimed at keeping it afloat.

Last year, the group stated that its “capital structure is not appropriate for the long term stability and requirements of the business”, as it has struggled with a rising tide of debt.

Today, Terra Firma – run by the outspoken Guy Hands – said it will contribute another £136m of equity in the form of 24 care homes, on top of the £350m equity already ploughed in when it bought FSHC for around £825m.

Read more: Terra Firma appoints Blackstone for Four Seasons

“We bought FSHC in 2012 with a clear plan that, by reducing the debt and injecting £350m of equity, it would become a viable business,” said Terra Firma's vice chair Justin King.

“The operational turnaround has made good progress and despite the challenging external environment, we still believe this business has a great deal of potential.”

FSHC's major creditor, secretive US hedge fund H/2 Capital, will also benefit from a refinancing of the company's debt.

A chunky £350m worth of existing notes will be swapped for the same value of new notes, which will “benefit from an extensive guarantee and first ranking security package”.

Read more: Terra Firma boss Guy Hands on buying Agent Provocateur, dyslexia and moving on from multi-million EMI loss

Another £175m of senior notes will be exchanged for £60m of new debt notes and a 20 per cent equity stake in the care homes group.

The Care Quality Commission (CQC), which regulates social care in England, said it was continuing to monitor FSHC closely but said it had no reason to believe that care provision from the business would “adversely change”.

“The announcement today will I am sure provoke some anxiety, but is an important step in securing the long-term financial future of this company,” said Andrea Sutcliffe, the CQC's chief inspector of adult social care.

Read more: Guy Hands stands firm as Terra Firma braces for Four Seasons battle with creditors

Related articles