Four Seasons creditor ditches board demand

The major creditor to Britain’s largest care home operator has ditched a demand for the company to appoint a majority of independent directors in a frantic bid to reach a compromise over a £26m interest payment due on Friday.

Sky News has learnt that H/2 Capital Partners removed the requirement from its negotiating position after directors of Four Seasons Healthcare Group indicated that they could not agree to it.

The decision by H/2 – confirmed by a source close to the investment firm – came ahead of a further round of discussions that were taking place between the two parties on Monday evening as they sought to ratify a so-called standstill deal over the debt repayment.
The Care Quality Commission (CQC), which regulates adult social care, had sought a firm agreement by the end of Monday in order to allay fears that Four Seasons is on the verge of administration.
The care home operator is responsible for 17,000 predominantly elderly residents and employs just over 25,000 people – meaning it occupies an important role in Britain’s adult social care provision.
Several insiders have told Sky News that Stuart Dean, the CQC’s director of corporate providers and market oversight, informed Four Seasons’ stakeholders towards the end of the last week about its desired timetable for a deal.
While not a legally binding deadline, Mr Dean’s comments left the participants in no doubt that the regulator was seeking confirmation from the various parties within that period.
Sources close to the talks said it was possible that an announcement could be made about the standstill later on Monday or on Tuesday, which would buy Four Seasons more time to thrash out a consensual restructuring plan.
The situation has been complicated by the role of Terra Firma Capital Partners, which bought Four Seasons for £825m in 2012 and has lost an estimated £450m amid the deteriorating financial performance of the care homes industry.
The removal of the governance demand could pave the way for a deal, since Terra Firma has control of the boards of Four Seasons and its subsidiaries through the way their voting rights are structured.
A spokeswoman for Terra Firma said it had made clear its offer to appoint an independent restructuring committee.
Terra Firma, which is run by the Guernsey-based financier Guy Hands, has been trying to hand the keys to Four Seasons to H/2 but is unwilling to relinquish its claim over 24 homes which are held within an entity called Brighterkind.
Insiders said that H/2 had also agreed to remove any reference to Brighterkind – which is the subject of a separate legal dispute – from the standstill agreement.

The debt forbearance would last until the end of March, with the next new interest repayment due in June.
Among the remaining sticking points is understood to be an anti-defamation clause demanded by H/2, which follows an escalating war of words between H/2 and Terra Firma in recent weeks.
One person close to Terra Firma described the clause as “a gagging order”, which sources close to H/2 denied.
The CQC, which can recommend to local authorities that they cease placing residents in homes, has told H/2 that it wants a formal guarantee that it will stand behind the company if a so-called standstill deal has not been reached by then.
That assurance is already understood to have been provided by H/2, which has lined up the crossbench peer Baroness Ford – who previously chaired Barchester, another care homes group – as Four Seasons’ chairman.
Like other operators in the sector, Four Seasons has seen its financial performance suffer amid cuts in local authority funding and rising costs such as the national living wage.
The prospect of the UK’s biggest care-homes group falling into administration just weeks before Christmas had begun to emerge amid the stalled talks between Terra Firma and H/2.
Sky News revealed at the weekend that EY, the accountancy firm, has been put on standby to handle an administration if the crisis at Four Seasons deteriorates further.
Were that to happen, it would be the industry’s biggest financial failure since the collapse of Southern Cross in 2011.
However, a formal standstill deal will reduce the risk of such an event, since it will give H/2 time to pursue a so-called consent solicitation exercise, canvassing support from Four Seasons’ other bondholders.