By Michael Ribbeck, Business Editor
Care home firm Southern Cross has been fighting for survival for several months but yesterday the company announced it was closing down.
Southern Cross owned more than 500 homes across the country and employed thousands of staff.
Those in the Bristol area include Haven Lodge in Portishead, Laurel Court Care Home in Nailsea, Whitchurch Care Home in Bristol and Wickwar Care Home in South Gloucestershire.
The Prime Minister has gone on record to say that the residents will not be left homeless but there is still uncertainty about who will take control of the four homes following the demise of Southern Cross.
Southern Cross has been struggling to stay in business for the last four months but the final straw came when its landlords refused to agree to a new deal on its rents.
The firm, which had 752 homes and looked after 31,000 residents, announced yesterday morning it was putting plans in place to close.
Landlords of 250 homes have agreed to take them back and run them themselves but negotiations are still taking place with the owners of the other 502 homes, which are thought to include the four in the Bristol area.
The negotiation process is expected to take three to four months.
Southern Cross said final details of the plan had yet to be settled but that creditors and staff would be paid.
The aim is make the transition to the new owners or operators as smooth and problem free as possible.
Until it became enveloped in the financial crisis Southern Cross was the country’s largest care home operator. It ran into a financial mess as a result of a rising rent bill combined with lower fees.
The firm had to deal with the double whammy of occupancy rates going into free-fall and local authorities reducing the number of patients they placed with the group.
For some weeks Southern Cross has been locked in negotiations over a restructuring of property arrangements.
It negotiated a 30 per cent rent cut for four months while the talks continued but though some landlords had been expected to take back their properties, yesterday’s announcement that all had decided to walk away from the deal came as a surprise.
Last week, Four Seasons, a care home operator that had leased 45 homes to Southern Cross, said it would take them all back and run them while Bondcare, another smaller operator with 40 homes, had already indicated it would take them back under its own control.
The group has 80 landlords but it is understood just eight owners account for 75 per cent of the homes
The GMB union has claimed that 336 of the care homes due to be taken back are owned by companies outside the UK, with 325 of them registered in tax havens.
GMB official Justin Bowden said: “Southern Cross may be on its last legs but for Southern Cross’s 31,000 residents and 43,000 staff this looks like a case of ‘out of the frying pan, into the fire’.”
“These 80 landlords are a rag-bag bunch whose number includes overseas interests, tax dodgers and, in some cases, ‘identity still unknown’.”
Chief executive Jamie Buchan is to lead the restructuring and Southern Cross said he would work closely with all interested parties to ensure “that the welfare of residents and staff is maintained”.
“The process that we have embarked upon now for some months, maintaining continuity of care, will be achieved and all our landlords, our lenders, our creditors, have been very supportive of a process which delivers that outcome,” chairman Christopher Price said.
Both he and Mr Buchan potentially face a tough time at a general meeting for shareholders today after shares were suspended and the company said there will be nothing left for investors once the restructuring is completed. At its 2007 peak, the group was valued at more than £1 billion.
A spokesman for David Cameron said: “We have said all along that no one will be left homeless as a result of this. Local authorities have a duty to ensure that people get appropriate care.
“There are currently around 50,000 spaces available across the country so there should be no reason why anyone will be out on the street.”