SoCro given the heave-ho by landlo(rds)

Care provider Southern Cross has confirmed it will shut down, after its landlords decided that enough was enough....

by Emma Haslett
Last Updated: 11 Jul 2011
Southern Cross is off to the great care home in the sky: it suspended trading in its shares this morning, following confirmation by the landlords of its 752 homes that they all want out. It’s been a painful few months for the debt-ridden care provider, which entered a four-month restructuring period in June – but its landlords, who are still owed £250m between them, have finally decided to put it out of its misery. And while the situation looks hopeful for the group’s 31,000 residents, and even its 44,000 staff, it looks as though shareholders are going to be in need of some serious TLC…

When Southern Cross entered this restructuring period, the idea was that it would shed a portion of its 752 homes, leaving it with somewhere between 250 and 400. But the landlords have (rather wisely, if you ask us) decided this wasn’t such a good idea after all; 250 of the homes have either found new operators or will be taken over by landlords, while the landlords of the other 502 homes are apparently ‘finalising’ their transition plans.

Obviously, in this kind of situation, vulnerable residents have to be the first priority – and Southern Cross’ CEO, Jamie Buchan, has already repeated his assurance to their families that it’s his objective to ‘manage the programme of transition professionally’; i.e. they’ll be taken care of, whatever happens.

Staff also have some cause for optimism. The GMB and Unison unions were quick to call the situation a ‘disaster’ for the homes’ employees. But all is not lost for those 44,000 workers (which we can’t help feeling sounds rather a lot given how many residents Southern Cross has – maybe that’s one reason it’s struggling so badly). Apparently, some of the homes’ new owners say they’re so desperate for back-office and management staff that many will be transferred on exactly the same terms they currently have.

Of course, this all depends on a) everything going to plan and b) promises being kept, but hopefully, it’ll be a surprisingly soft landing for the homes’ residents and their staff. However, it’s a very different story for shareholders – for whom, as a statement rather bluntly put it this morning, ‘little or no value’ will be left. That’s going to be pretty painful: even on Friday shares were trading at 6.25p, which may be a fraction of their 2007 peak (of 600p+) but remains a whole lot better than nothing.

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