Cable vetoes a Southern Cross bailout
STRUGGLING care home operator Southern Cross will not receive a government bailout, but the department for business is making sure its banks maintain its flow of credit properly, Vince Cable said yesterday.
The news came as Southern Cross told its creditors that it plans to hand back 132 care homes to their landlords, which would then likely be wound down.
The firm has already picked out 47 homes that would be handed back over the summer, with a further 85 expected to go in the next two to five years, a person familiar with the company said yesterday.
Speaking in Parliament, Cable said there was “no way” to bail out the firm despite its rental woes.
“My colleague the minister of state has been in touch with the banks to ensure that the process of managing their credit in this critical period is properly managed, and that it happens in an orderly way,” Cable said.
Southern Cross hired accountant KPMG in February to lead its debt restructuring and is being advised by lawyers Clifford Chance and investment bank Greenhill as it fights to avoid going into administration.
The firm has announced plans to cut 3,000 of its 44,000 staff to reduce its costs. It has also asked landlords to accept 30 per cent less rent for the next four months.
Cable confirmed the department for business, innovation and skills is investigating the role of private finance, particularly private equity, in running care providers. Southern Cross was owned by private equity for four years from 2002 to 2006.
FAST FACTS | SOUTHERN CROSS CRISIS
● Cares for 31,000 of the UK’s 230,000 care home residents
● Can not pay its £230m rent bill on its 758 homes so has asked for a 30 per cent deferral
● Will cut 3,000 of its 44,000 staff