Row deepens between Guy Hands' Terra Firma and hedge fund H/2 over Four Seasons care home restructuring

Lucy White
Senior Citizens and Pets Work Together at New Mark Care Center
Four Seasons' residents and workers could be affected if the business was to default on its interest repayments (Source: Getty)

Hedge fund H/2 Capital Partners, the largest creditor to ailing care home group Four Seasons, has urged Four Seasons to respond to its suggested restructuring plan.

H/2 said this morning it had not received any formal response from Four Seasons regarding the restructuring plan, aimed at keeping the business afloat, and believed that the plan had been rejected.

Read more: Four Seasons facing rising bills as hedge funds jostle for control

Four Seasons, which is majority owned by Guy Hands' private equity firm Terra Firma, has admitted it will not be able to stump up a £26m interest repayment to bondholders including H/2 next month. H/2, which had voluntarily agreed to defer those interest payments, said today that Four Seasons should at least sign an agreement to finalise the deferral.

But in a confusing turn of events, the care home group later responded that it had indeed been in contact with H/2 for the past week about deferring interest payments, and had not rejected any proposal.

A twisting tale

Last month, Terra Firma tabled a restructuring plan aimed at turning around the fortunes of struggling Four Seasons. It proposed contributing new equity of £136m, in the form of 24 extra care homes which it had purchased.

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

However these 24 homes have proved a sticking point. Terra Firma alleges it found that lawyers Allen & Overy had already mistakenly transferred the security over these 24 homes to the bondholders, including H/2. They are currently the subject of a High Court dispute, as Terra Firma and the H/2-led bondholders each claim rights to the 24 homes.

H/2's own “improved” restructuring plan – which built on Terra Firma's and would involve converting a chunk of the debt to equity, effectively giving the keys of Four Seasons to the bondholders – seemed to assume that the 24 care homes would be included as part of Four Seasons.

In a cryptic media statement at the beginning of this month, Terra Firma seemed to agree to this plan. But City A.M. understands that no formal understanding has been reached, since Terra Firma maintains that it is the rightful owner of the 24 care homes.

Read more: Four Seasons Healthcare is on the hunt for a buyer for its mental health unit Huntercombe

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