Struggling care home group Four Seasons gets breathing space as it finally agrees a payment standstill with hedge fund creditor H/2
Struggling care home group Four Seasons has finally agreed an interest payment standstill with H/2 Capital Partners, the hedge fund which owns most of its debt.
The agreement comes not a day too soon, as a £26m interest payment was due tomorrow which Four Seasons warned it could not pay.
Today’s deal will give the group, which looks after 17,000 elderly residents, breathing space to organise its restructuring and allow private equity owner Terra Firma to give up control to the bondholders.
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“We are pleased to have agreed the standstill which will help ensure continuity of care and stability for the residents and employees of Four Seasons,” said Spencer Haber, chairman of H/2.
“The standstill is the first step toward a successful restructuring to secure the long-term future of this vitally important care provider.”
The Care Quality Commission, which oversees adult social care in England, had given H/2 and Four Seasons a provisional deadline of 11 December to come to an agreement. But there there were sticking points in negotiations – primarily H/2’s requirement that an independent board should be established to oversee the restructuring.
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Four Seasons’ current board, which contains several individuals connected to Terra Firma, objected to this. It said Terra Firma must continue to be represented on the board until it has safely negotiated the terms on which it will hand its ownership over to the bondholders, exiting the disastrous investment.
H/2 dropped this requirement earlier in the week as negotiations ground on. But there proved to be other disagreements – the care home group objected to the fact that it would have to pay the restructuring adviser’s fees, and Four Seasons refused to sign an agreement which would have prevented it from talking about the deal.
Compromise appears to have been reached, however. In today’s deal, H/2 reserved the right to ditch the standstill agreement if Four Seasons or Terra Firma spoke publicly about the deal without its consent.
The relationship between owners Terra Firma and creditors H/2 has not been easy in recent months, as Terra Firma last week accused the hedge fund of blocking its email addresses and refusing to meet.
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