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Southern Cross Care Homes

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Given that the media attention is firmly focused on the News International scandal, I don't think that this story should go without comment.

 

The worst part of this is that Southern Cross actually owned these nursing homes. And while business was booming, and all was good, parent comapny Blackstone (the US private equity firm) took a decision with an astounding lack of foresight, and sold the 294 nursing homes off to RBS, who in turn sold to private landlords (thereby gaining a significant wedge of cash -£1 billion), and then rented them back.

 

When, due to cuts in budget, local government changed the criteria for occupancy, and the amount they'd contribute, Southern Cross has found itself unable to pay the overheads. Still, privatisation eh, Dave.

 

 

BBC News - Southern Cross set to shut down and stop running homes

 

 

Southern Cross set to shut down and stop running homes

 

Care home operator Southern Cross is set to shut down after landlords owning all 752 of its care homes said they wanted to leave the group.

 

"It is currently envisaged that the existing group will cease to be an operator of homes," the firm said.

 

Southern Cross added that the landlords were still committed to providing continuity of care to its 31,000 residents.

 

Trading in the company's shares has been suspended.

 

The Darlington-based Southern Cross and its landlords and creditors are a month into a four-month restructuring period, which was agreed in crisis talks in June.

 

The statement said that the details of the restructuring were not yet settled and there was still a possibility of further changes.

 

It had been expected that some of the landlords would leave the group, leaving Southern Cross operating with between 250 and 400 homes, but now it appears that the group is to disappear altogether.

 

Ministers have been quick to promise that Southern Cross residents will not be turfed out on to the street.

 

But that does not mean that these vulnerable people are not facing a great deal of uncertainty and, potentially, upheaval.

 

The hope now is that the group will be broken up into chunks for other providers to take on.

 

If that happens the new owners may still want to close some of the homes - something that everyone agrees is both distressing and damaging for the health of those involved.

 

But the Southern Cross developments raise wider questions about the whole sector.

 

While the problems the group has faced have been linked to its business model, the situation has been further compounded by cuts in fees paid by councils.

 

Last year alone fees paid by local authorities for state-funded care home residents were cut by about 2.5% once inflation was taken account.

 

Suffice to say, the squeeze has been felt across the industry - not just by Southern Cross. It is getting increasingly tough to keep services going.

 

The process began when the UK's biggest care home operator said it was unable to pay its rent bills to its landlords.

 

The statement said that little or no value would be left for the shareholders.

 

"We regret the loss of value which shareholders have experienced," Southern Cross chairman Christopher Fisher said.

 

About 250 of the homes will immediately begin to be transferred to other operators.

 

The owners of the rest of the homes are still finalising their plans, but they may end up using the existing Southern Cross back-office staff and some of its management.

 

"We anticipate that the period of uncertainty which we have been experiencing will now draw to a close," Mr Fisher added.

 

But Michelle Mitchell at Age UK, said that despite the promises about continuity of care, "this has been a really worrying few months for Southern Cross residents and their families, with these latest developments only adding to their concern".

 

Labour MP John Mann called on the government to intervene to make sure that care home residents were not forced to move.

 

"No resident should be forced to move out of their home and in the big sell-off there must be no cherry picking of the better properties," said Mr Mann, who has four Southern Cross homes in his constituency.

 

"Government intervention is needed now so that resident needs are put first and to prevent an even greater disaster from unfolding."

 

Martin Green, chief executive of the English Community Care Association, said the collapse of Southern Cross showed there were serious problems with the funding of care in the independent sector.

 

"I think the Southern Cross issue which has come to a head today, is very much an issue that other providers are facing because of the levels of resource that they have to deliver care on," he told BBC Radio 4's You and Yours programme.

 

"Fees are a really big issue and we've had several years of nil increases, and of course we've had inflation rates running at 4-5%."

 

David Rogers, chairman of the Local Government Association's Community Wellbeing Board, said: "Councils take the welfare of care home residents extremely seriously and throughout this process that has always been their priority."

 

"It's greatly reassuring, and testament to the good work which has been going on behind the scenes and the resilience of the care home system, that a solution has been found which will hopefully avoid major upheaval for the vulnerable people involved."

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Mrs God Knows is the manager of one their care homes and I can tell you they have treated their staff like shit about this catastrophe. She hasnt had a day off for the past fortnight dealing with all the residents families rightful queries about how their loved ones are going to end up.

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Guest Slim(fast)Shady

Easy solution to the care home problem in this country...

 

Take all the elderly out and put them in prison....they would get regular checks in their rooms,decent hospital treatment if fall ill,opportunities to study at art classes,pottery etc,TV/Playstations in their room..the list goes on..and..

 

Take all the prisoners out and put them in Nursing Homes...squalid conditions,abandoned to fend for themselves...shit food......i could go on..

 

Sorted!

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The way we treat older people is, largely, disgraceful. Few in number are the care homes that exist other than to maximise profits for unscrupulous owners.

 

The only people who should profit from care homes are those who are being cared for.

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I worked in a couple of Nursing homes in Hull while I was at University and one wasn't too bad, but the other was pretty grim. There wasn't any active abuse or anything like that, but the level of care was appalling. mainly down to being understaffed and having care assistants who would struggle to find work elsewhere as they were quite frankly too fucking thick. It was the worst I had ever been paid and the hardest job I have ever had. The difference between the ones here and the ones in England is quite astonishing, but even here I don't think they are adequately staffed. the main difference is that they are state run, so while there is definitely room for improvement, the money isn't being spunked on shareholders.

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Bet Cameron's hoping for some harsh winters in the course of his parliament, maybe a severe flu outbreak anything to diminish the elderly numbers.

 

 

I've worked for this lot on more then one occasion - not lasting more then a couple of months each time. It was a job i walked into when i was on the bones of my arse. As RiS said, most of the staff thick as fuck and the level of care they provide isn't because they want to be there but they can't find other jobs. The same with any private sector you need to offer the money to attract the more suitable staff.

 

I fail to see how nursing homes don't make a profit the money they charge, yes there are over heads but when you've got staff on minimum wage, a food budget of less then £3 a day and a charge of anything from £500-£1000 per client per week.... it beggers belief that they could run into financial trouble.

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Bet Cameron's hoping for some harsh winters in the course of his parliament, maybe a severe flu outbreak anything to diminish the elderly numbers.

 

 

I've worked for this lot on more then one occasion - not lasting more then a couple of months each time. It was a job i walked into when i was on the bones of my arse. As RiS said, most of the staff thick as fuck and the level of care they provide isn't because they want to be there but they can't find other jobs. The same with any private sector you need to offer the money to attract the more suitable staff.

 

I fail to see how nursing homes don't make a profit the money they charge, yes there are over heads but when you've got staff on minimum wage, a food budget of less then £3 a day and a charge of anything from £500-£1000 per client per week.... it beggers belief that they could run into financial trouble.

 

They make fucking huge profits Melons, don't belive that shit.

 

Delve deeper into who they sold the business to.

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I've a friend who's a manager for them and they were unceremoniously asset-stripped - questions should also be asked of rbs as they must have realised this would make the business model shaky. Both probably knew that local authorities and government would have a duty of care to ensure the residents were looked after.

 

In healthcare there really should be safeguards put in place to protect the vulnerable in the private sector, especially as we're all living longer and demand will only increase.

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I've a friend who's a manager for them and they were unceremoniously asset-stripped - questions should also be asked of rbs as they must have realised this would make the business model shaky. Both probably knew that local authorities and government would have a duty of care to ensure the residents were looked after.

 

In healthcare there really should be safeguards put in place to protect the vulnerable in the private sector, especially as we're all living longer and demand will only increase.

 

The private sector has no business being anywhere near the care sector. I've said a few times that the profit should never, ever be a consideration when it comes to something which dictates life and death, whether it be health, care, or the utiliies. The private sector encourages risky business models and when wealth is extracted, it stands to reason that this is money which could have been put to use elsewhere, either by recruiting a better caliber of staff, or ensuring a better quality of facility.

 

Posted this a while back:

 

FT.com / Companies / Healthcare - Southern Cross chiefs netted £35m

 

Top executives at Southern Cross, the embattled care homes operator, pocketed £35m by selling their entire stakes in the company in late 2007, just before its shares began to plunge.

 

Southern Cross’s former chairman, William Colvin, and three executive directors all sold their stakes on December 13, 2007 at 550p a share. The company’s shares closed at 6.3p on Friday.

 

EDITOR’S CHOICE

Leaseback property deals in spotlight - Jun-05.Care home watchdog has staff shortfall - Jun-02.Westminster Blog: Hiring freeze hits care home watchdog - Jun-03.Care homes rivals circle Southern Cross - Jun-01.Ministers on alert over care home crisis - Jun-01.Landlords face unpaid Southern Cross rent - May-31..Blackstone also reaped large profits from selling its holding a year before its value collapsed. The US private equity group bought Southern Cross for £162m in 2004, tripled the number of care homes it operated through acquisitions of two other operators, and floated the company on the London Stock Exchange in 2006.

 

Southern Cross, the UK’s biggest care homes operator with 750 homes and 31,000 elderly residents, is now on the brink of bankruptcy and has become a symbol of the crisis affecting the sector. A Financial Times investigation published on May 31 found that one in seven care homes managed by private sector companies had been rated “poor” or “adequate” by the industry regulator, the Care Quality Commission.

 

The Southern Cross executives who sold their shares at the top of the market cited forthcoming changes in capital gains tax legislation. Directors at many other companies also sold stock prior to April 2008, when the capital gains tax rate rose from 10 to 18 per cent.

 

Philip Scott, then Southern Cross’s chief executive, netted the biggest windfall, of £11.1m. Mr Colvin, Graham Sizer, chief financial officer, and John Murphy, chief operating officer, received £6.6m-£10.2m.

 

At the time of the disposals, Mr Colvin, Mr Sizer and Mr Murphy announced their intention “to reinvest in the company’s shares at the appropriate time”. Mr Colvin later purchased 1m shares at between 83p and 389p, while Mr Scott’s purchases totalled £300,000.

 

“Shareholders like to see directors maintain a meaningful stake in the business in order to achieve an alignment of interests,” PIRC, a corporate governance consultancy, told the FT. “To sell an entire holding, however financially advantageous, doesn’t send the best signal.”

 

Mr Scott left the company for rival Priory Group the following month. Mr Sizer also resigned. The shares fell sharply, reaching a 12-month low of 332p on January 30, 2008.

 

That decline was dwarfed on June 30, 2008 by a 60 per cent single-day fall, to 130p. The sell-off was triggered by a warning that Southern Cross had breached covenants on a £46m loan facility. The company also announced it would miss its full-year earnings target.

 

A spokesman for Mr Scott said: “He is proud of his record managing Southern Cross – it was a FTSE 250 company and care quality was highly regarded.” A spokesman for Mr Murphy said the company was in good financial health when he left in August 2008. Mr Colvin, who left in October 2008, and Mr Sizer did not respond to requests for comment.

 

Joe Baratta, a senior managing director at Blackstone, remained on Southern Cross’s board until April 2007. Blackstone had sold the last of its shares in Southern Cross the previous month, realising an estimated 300 per cent return.

 

“During Blackstone’s ownership, [southern Cross] experienced growth and profitability and was healthy at the time of its IPO and was viewed as one of the highest quality operators in the sector,” Blackstone said in a statement on Thursday.

.Copyright The Financial Times Limited 2011. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

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Sec, it is 'waiting' to happen everywhere.

 

As you know I had the misfortune to work for Castlebeck.

 

They were owned by the Coolmoore Mafia. They sold the business to a private Swiss Private Equity Firm that they own over 50% of.

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Sec, it is 'waiting' to happen everywhere.

 

As you know I had the misfortune to work for Castlebeck.

 

They were owned by the Coolmoore Mafia. They sold the business to a private Swiss Private Equity Firm that they own over 50% of.

 

Do Castlebeck own their own properties?

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The private sector has no business being anywhere near the care sector. I've said a few times that the profit should never, ever be a consideration when it comes to something which dictates life and death, whether it be health, care, or the utiliies. The private sector encourages risky business models and when wealth is extracted, it stands to reason that this is money which could have been put to use elsewhere, either by recruiting a better caliber of staff, or ensuring a better quality of facility.

 

Don't disagree but it's a fact we're stuck with Cameron and his stance is to drive users to private care providers - claiming to provide choice but not talking much about quality.

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Shit company doing a shit job goes bust. Since when was this a bad thing?

 

Even better, when it's the state doing a shit job, it's the taxpayer that gets stung, whereas here, the shareholders are the ones taking the hit.

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Shit company doing a shit job goes bust. Since when was this a bad thing?

 

Even better, when it's the state doing a shit job, it's the taxpayer that gets stung, whereas here, the shareholders are the ones taking the hit.

 

When it is millions of tax payers money being pissed up against the wall.

 

:wallbutt:

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When did this happen? The article points out that shareholders will be the ones feeling the pain here.

 

Yes, because the old dears in care homes that can't actually pay the fucking rent won't be affected at all.

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Easy solution to the care home problem in this country...

 

Take all the elderly out and put them in prison....they would get regular checks in their rooms,decent hospital treatment if fall ill,opportunities to study at art classes,pottery etc,TV/Playstations in their room..the list goes on..and..

 

Take all the prisoners out and put them in Nursing Homes...squalid conditions,abandoned to fend for themselves...shit food......i could go on..

 

Sorted!

 

jokes aside... you not far wrong.

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Guest Slim(fast)Shady

Aye...didn't mean in literally.....was meaning that ,muggers,burglars and other scum get a better deal than the elderly that have paid in.....worked and made this country what it WAS..

 

Just makes you not want to get old really....all rather depressing!

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Shit company doing a shit job goes bust. Since when was this a bad thing?

 

Even better, when it's the state doing a shit job, it's the taxpayer that gets stung, whereas here, the shareholders are the ones taking the hit.

 

As the article from the FT says though, the top brass all walked away with plenty of cash, as they always do. The state will have to pick up the pieces, fund places for these people otherwise they'll be out on their ear. Not to mention all the stress involved for people who will effectively be losing their homes.

 

The fundamental difference between the state and the private sector is that the state can't wash its hands. The private sector has access to so many loopholes that there's nothing to stop the people who ran this firm into the ground from starting again under a different name, cash in pocket, while the state scrambles to find a home for these people to clean up the fallout.

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What's the "scramble" to find a new home for these people? They have homes. All that will happen is someone else will step in to run the homes, and hopefully run them better and avoid going bust like the last lot.

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What's the "scramble" to find a new home for these people? They have homes. All that will happen is someone else will step in to run the homes, and hopefully run them better and avoid going bust like the last lot.

 

Fucking hell mate.

 

You sure that blue tie isn't too tight around your neck?!

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Shit company doing a shit job goes bust. Since when was this a bad thing?

 

Even better, when it's the state doing a shit job, it's the taxpayer that gets stung, whereas here, the shareholders are the ones taking the hit.

 

Except that this wasn't what happened. A private equity firm bought the company. It sold the homes, took on lots of debt and extracted a billion quid's worth of profit. The PE company is very happy, having made a 400% return on its investment, but the people living in the home are suffering the consequences. The private sector may be the right way to go sometimes but not always.

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What's the "scramble" to find a new home for these people? They have homes. All that will happen is someone else will step in to run the homes, and hopefully run them better and avoid going bust like the last lot.

 

They don't have homes, they will have sold them to pay for their care.

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