Southern Cross to be wound up

Southern Cross, the care homes company engulfed in a financial crisis, is set to be wound up after announcing on Monday that all 80 of its landlords wanted to transfer their homes to other operators.

The company – the biggest in its sector with 752 homes and 31,000 mostly elderly residents – had spent months trying to stay afloat, after revealing in March that it was set to breach its banking covenants. Its revenues had been hit by cuts to local authority care fees, while it was locked into annual rent increases of 2.5 per cent.

The company conceded defeat when NHP, owner of a third of its homes, said it wanted to find new management for them. It had been hoping that NHP would be the “anchor” landlord for a revamped Southern Cross, operating about 400 homes.

Southern Cross will cease to operate care homes by the end of this year. It will almost certainly cease to exist as a public company, people close to the situation said, although it is possible that some of its back office services will be used by other operators.

The future of the homes is not yet clear. Eighty-five homes owned by Four Seasons and Bondcare, two rival operators, will be taken over by those companies. NHP is likely to establish an operating division or help to set up a separate operating company to run its homes, industry figures said. The company and its landlords have guaranteed that no homes would close between now and October, although some may shut after that.

The GMB trade union raised concerns about the impact on Southern Cross’s 44,000 staff, but the company said they would be transferred to the new operators of the homes on their current terms. Plans to cut 3,000 jobs, announced last month, have been shelved.