A debt-ridden care home chain with around 17,000 vulnerable residents is on the brink of collapse amid a row between its wealthy backers.
Four Seasons Health Care could be tipped into administration within 10 days if it misses a £26m interest payment due next Friday that it has warned it may not pay.
Its owner, private equity firm Terra Firma which is run by tycoon Guy Hands, and key lender, US hedge fund H/2 Capital Partners, have yet to agree on a rescue deal as the deadline looms.
Four Seasons Health Care could be tipped into administration within 10 days if it misses a £26m interest payment due next Friday that it has warned it may not pay (file photo of a Four Seasons care home)
The crisis has raised fears of a repeat of the collapse of Southern Cross, which put 31,000 people at risk when it went bust amid a slump in the property market in 2011. About 100 of those homes were taken over by Four Seasons.
It comes amid huge concern about debt and underfunding across the care home sector. As well as its residents across 360 homes, Four Seasons has 25,000 employees and hundreds of agency staff.
Last night calls were made for the sides to get on with a rescue deal and for the government to step in.
Norman Lamb, the Liberal Democrat MP and former minister of state for care, said: 'I would say to both sides - get your act together.
'It's intolerable to be fighting in this way when people are potentially at risk and you have got bigger responsibilities.
It comes amid huge concern about debt and underfunding across the care home sector (file photo)
'You entered this sector - you have got to demonstrate that you are fit and proper for the role.
'The government cannot simply say it's not our responsibility - they have to be willing and able in a crisis to step in to protect very vulnerable people - that has to be the bottom line.'
Former pensions minister Baroness Ros Altmann said: 'It's a deeply, deeply troubling time for everyone who is living in a Four Seasons home. It is really quite shocking that thousands of people's lives and wellbeing are in the balance.'
City power broker Guy Hands bought Four Seasons care home chain in April 2012 for up to £825m after it battled crippling debts under the ownership of Qatar Investment Authority.
He is one of the most prominent power brokers in the City, having made more than £40bn of deals and also owns Ettington Park hotel in Stratford-upon-Avon.
Four Seasons struggled financially before and since his takeover, with bosses blaming government funding in the sector, and spiralling staff costs. It has also had high interest payments.
US hedge fund H/2 Capital Partners, run by former Lehman Brothers banker Spencer Haber, has bought up an estimated £256m of Four Seasons debt since 2015.
Last month Four Seasons warned it may not be able to make a £26m interest payment due on December 15 and put forward a restructuring proposal.
H/2 Capital Partners put forward a different proposal under which it will take control of the business and install a new chairman. Terra Firma has welcomed the proposal.
However, the two sides disagree over whether an extra 24 highly profitable care homes should also be thrown into the deal.
City power broker Guy Hands bought Four Seasons care home chain in April 2012 for up to £825m
Terra Firma argues they are not part of the deal and potential inclusion was the result of a paperwork error. H/2 believes they should get the homes. A court is due to rule on the row.
Last week H/2 put forward a deal under which restructuring could move forward before the court decides. However, sources claim attached conditions make it difficult to sign.
H/2 could put Four Seasons into administration after a month-long grace period in January if the interest payment next Friday is missed. Sources close to the situation say that is unlikely. Both sides stress they are working hard to agree and have residents interests at heart.
Health watchdog Care Quality Commission could step in and stop Four Seasons from taking on new residents if it is concerned that the financial difficulties are affecting quality of care.
A spokesman said last night: 'We continue to closely monitor developments.
'I would like to confirm at this point in time we do not believe that services are likely to be disrupted as a result of business failure.'
The row follows long-held criticism of government underfunding for social care and concerns over whether private funds seeking high returns are appropriate owners in such a crucial sector.
Mr Lamb said: 'I think beyond the growing sense of crisis in the care sector there is also I think a really big issue over whether these complex financial arrangements are justifiable in a market like this.
'My own view is it is not like selling widgets - this is very personal care people are receiving and just don't think we can play fast and loose with people's lives and the care that some very vulnerable people receive.'
Shadow health minister Barbara Keeley MP called on both sides to make sure there was no disruption to residents.
She added: 'The Tory Government must come forward with plans to ensure that local authorities have the resources they need, after the damaging cuts they have made to local authority budgets since 2010.'
Clive Betts, chair of the Communities and Local Government Committee, said: 'The Government's green paper promised by summer 2018 must include a long term fix to ensure our social care system is able to meet the demographic pressures facing it.'
The Department of Health is monitoring the situation. A spokesman added: 'We know the social care sector is under pressure due to our growing ageing population.
'That's why we've provided £2bn additional funding over the next three years and next summer we will publish plans to reform social care to ensure it is sustainable for the future.
The Department of Health is monitoring the situation. A spokesman added: 'We know the social care sector is under pressure due to our growing ageing population'
'The public can be reassured that the CQC are monitoring the financial stability of the biggest adult social care providers and if services stop, the law means local authorities will step in to protect individuals receiving care.'
Robbie Barr, Chairman of Four Seasons Health Care said: 'Four Seasons is seeking to achieve an orderly and timely handover from Terra Firma's ownership to the creditors through a restructuring.
'This week we have opened our books to the advisors of our single largest creditor which is another positive step forward towards a restructuring.
'In the meantime, all the parties agree that the needs of our 17,000 residents and the smooth running of the business are of the utmost importance.'
Guy Hands - who is worth an estimated £265m - is notorious for his disastrous, debt-fuelled takeover of record firm EMI at the height of the financial crash – which cost terra Firm around £2bn.
A spokesperson for Terra Firma said: 'There is no reason to put Four Seasons into administration. Despite having written off its £450 million investment in the Four Seasons business in 2015, Terra Firma has continued to invest in Four Seasons and drive operational improvements in care quality.
'Terra Firma's priority has been continuing to run the homes well for the benefit of the many elderly and vulnerable patients. We call on H/2 Capital Partners, who have acquired their debt at a discount since 2015, to stand by its commitment to find a consensual outcome for the benefit of employees and residents and head off the risk of the obvious disruption that administration would trigger.'