Four Seasons proposes major financial and property restructure
Major care home operator Four Seasons Health Care has published a proposed financial and property restructuring package.
The key elements of the proposal, planned for implementation in November, are that:
- Major stakeholder Terra Firma will inject equity value by way of 24 homes outside of FSHC that they valued at £136m in December 2016. These homes would contribute an estimated EBITDA increase of £18.9m and a cash flow increase of £17.1m.
- Proposed refinancing of the debt with existing Senior Secured Notes (SSNs) of £350m being exchanged for £350m of new SSNs which would come with an extensive guarantee and first ranking security package granted by the restructured group. Under the proposal, the existing Senior Notes (SNs) of £175m will be exchanged for £60m of New SNs and 20% of the equity in the restructured group. In addition, there would be no payment of the existing Senior Notes £10.7m December interest.
- A proposed rebasing of certain of the leasehold rents to market, as FSHC says many homes are currently paying over market levels of rent. In addition, as of 16 October 2017, FSHC has separately refinanced the term loan facility with a new £40m term loan.
Four Seasons chairman Robbie Barr said the restructuring would significantly improve the leverage of the business, ensuring a long-term sustainable outcome for the FSHC homes and hospitals, residents and their families and colleagues, and that the Care Quality Commission had been kept fully informed and was aware of the key terms of the proposed restructuring.
“For the past 18 months we have been very clear that a capital restructuring is needed to ensure the long-term stability of the business and allow it to continue to build on its strong operational turnaround,” said Mr Barr.
“The proposal being put forward to creditors by FSHC and its shareholders will, we strongly believe, provide certainty and continuity for our residents, patients, and the thousands of colleagues who deliver care across the business, whilst also protecting creditors’ value.
“There will be no impact on our operations, including our residents and colleagues, as a result of this announcement.”
Terra Firma vice chairman Justin King said the investor firmly supported the FSHC board in their proposal.
“Our intention to inject significant equity through the contribution of additional homes is further evidence of our long term commitment to the business,” said Mr King.
“We bought FSHC in 2012 with a clear plan that by reducing the debt and injecting £350m of equity it would become a viable business. Since then, all the action we have taken in support of the company demonstrates how seriously we take our role as a responsible investor.
“The operational turnaround has made good progress and, despite the challenging external environment, we still believe this business has a great deal of potential. We are now offering to inject a further £136m of value which, together with the proposals on debt, if agreed, will give the business the secure financial footing it needs to continue the good progress made by management in the last two years. This ultimately will provide stability for all stakeholders including, most importantly, residents and their families.”
With more than 17,000 beds, Four Seasons is the UK’s second biggest care home operator, exceeded only by HC-One with 22,000 beds.