Care homes face escalating crisis
The recession revealed the worst behaviour of the City and, in particular, the excessive lending by the banks.
Careless: Protesters lead a demonstration against former Southern Cross Healthcare owner Blackstone
But the excesses are still being felt to this day, best illustrated by care home operator Southern Cross's decision to withhold rent payments and ultimately admit its business model has failed.
And yesterday its former owner, private equity firm Blackstone, which implemented the strategy, was accused by the GMB union of being more secretive than the Mafia.
But Southern Cross is not unique within the care home sector for becoming the object of private equity firms' affections.
Investment vehicles ploughed billions into the sector before the recession, racking up huge debts with lenders when loans were easy to come by and property prices were skyrocketing.
But as the downturn hit, house prices dropped and lenders started calling in their debts, leading to problems.
Combined with local authorities - which account for 60% of care home revenues - starting to cut their spending and families delaying admitting their relatives, a perfect storm was created which led to defaults.
Banks started taking control of the care homes as the likes of the Qatar Investment Authority pulled the plug, having run up more than £1bn in debts.
And as the endless changes in ownership of other care home operators shows, it is not just Southern Cross that has had a brush with the private equity world.
FOUR SEASONS
The biggest rival to Southern Cross underwent one of the largest and most complex restructuring processes in Europe in 2009 after its owners defaulted on repayments on its massive £1.5bn debt pile.
With money flowing freely and banks lending excessively, the Qatar Investment Authority bought Four Seasons in 2006 for £1.4bn, financed almost entirely by debt.
It managed to renegotiate its finances with the 30 lenders it owed money to - the biggest being government-controlled RBS, which was owed £600m - by agreeing a debt-for-equity deal. The agreement means the company still has debts of £750m which it was supposed to pay back in September 2010. This was extended by two years.
Running more than 400 homes with 19,800 places, its financial position is not as perilous as Southern Cross's, partly due to a different business model.
Owning 60% of its homes means it is not burdened with the high rental bill its rival faces, but chief executive Dr Pete Calveley did admit the reduced rent it will receive from Southern Cross will have a 'modest effect' on profitability.
CRAEGMOOR
The care home provider, which focuses primarily on mental health patients across its 174 homes, has been through a number of owners in recent years, leaving some in the industry struggling to keep up.
Most recently it was bought for an 'undisclosed' sum in April by The Priory - best known for its celebrity admissions. Before that it was owned by private equity firm Advent, which, confusingly, also owns The Priory - having spent £925m to buy it from previous owner RBS. Since it is in the hands of private equity, getting any up-to-date figures of its success is next-to-impossible, but it is thought much of the debt incurred in Advent's purchase of The Priory is likely to have been pushed onto Craegmoor's balance sheet.
Craegmoor almost bought Four Seasons in 2009 when the latter was struggling to persuade its lenders to restructure its debt mountain.
CARE PRINCIPLES
Tainted with the QIA brush which left Four Seasons with huge debts, Care Principles is now owned by BarCap, the investment banking arm of Barclays.
QIA, through its then investment vehicle Three Delta, spent £270m in 2007 buying the group from another private equity firm, 3i. Analysts said the company had been vastly overvalued, and were proved right when in 2009 it defaulted on the loan. The biggest lender, Barclays, wrote off £200m and assumed control.
The bank tried selling the company, which operates 17 homes, but suitor Four Seasons had its own debt problems from its time under the Qataris.
CARE UK
Chairman John Nash took home a healthy £20m after he recommended a £281m cash bid for the formerly listed company in 2010.
Bridgepoint was happy to spend the money after a lower bid by Advent (a former employer of Nash) was deemed too low.
The company continues to generate flat revenues around £200m, but in the six months to March it made a pre-tax loss of £4.3m, compared with a £9.2m profit a year earlier.
It was also revealed last year that Nash gave Health Secretary Andrew Lansley a £21,000 donation while he was in opposition.
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