Four Seasons Health Care earns reprieve after deal with creditors

A deal has been agreed to stave off the collapse of Four Seasons Health Care, which looks after 17,000 elderly and vulnerable people, after the company’s largest creditor agreed to drop several conditions.

Loss-making Four Seasons had warned it might not honour a £26m debt payment due by Friday, raising fears the firm could become the largest care home operator to fall into administration since Southern Cross in 2011.

After protracted talks with its largest lender, the US investment firm H/2 Capital Partners, both sides issued a statement deferring the payment until 2 April 2018 and postponing key arguments about how to restructure the business.

But discussions did not involve Four Seasons’ majority owner Terra Firma, indicating that the restructuring effort could be hampered by lingering disagreements between H/2 and the private equity house.

Under the proposals, subject to agreement from 90% of bondholders, creditors will forgo Friday’s interest payment and agree several “milestones”.

The first such milestone is that a restructuring plan should be in place by 7 February next year, with final approval from bondholders to be sought by 2 April.

The Four Seasons chairman, Robbie Barr, said: “The board and I look forward to working closely with H/2 and their advisers on delivering a restructuring that will provide the right capital structure for the company’s long-term needs.

“The standstill gives a period of stability for the company and its stakeholders but most importantly for our residents, patients, their families and our employees.”

Spencer Haber, a former Lehman Brothers banker who is founder-chairman of H/2 Capital Partners said: “The standstill is the first step toward a successful restructuring to secure the long-term future of this vitally important care provider.”

Missing Friday’s deadline would have left Four Seasons with 30 days to avoid administration but, in an effort to secure agreement, H/2 dropped conditions it hoped to attach to the deal, including the appointment of an independent board.

Four Seasons will present the debt deferral proposal to creditors next week, with the approval of 90% required for it to be accepted.

H/2 owns less than 75% of one tranche of debt but more than 75% of another. The restructuring plan to be presented next year will require approval from three-quarters of bondholders.

Terra Firma invited Spencer Haber and H/2 to meet for talks to allow the two sides to “work together, collaboratively, on a detailed handover plan for the operations of the business”.

Terra Firma said it was willing to hand over Four Seasons’ 343 homes if H/2 Capital Partners protects and runs 24 other homes, the ownership of which is a matter of legal dispute.

Ownership of the 24 homes has proved a major sticking point in discussions between Terra Firma H/2 and is likely to remain a bone of contention that could disrupt the restructuring effort needed to save the business long term.

Andrea Sutcliffe, chief inspector of adult social care at the Care Quality Commission which regulates social care, said: “I would like to confirm at this point in time we do not believe that services are likely to be disrupted as a result of business failure.”

Sharon Wilde, the GMB trade union’s national officer for care, said: “This deal is a very welcome Christmas present for Four Seasons staff and residents.

“Imagine heading into the festive period without knowing if your job is safe or if you will be forced to move home?”