Southern Cross Healthcare Group has concluded a refinancing with its banking syndicate, which is led by Barclays. Under the agreement its term loan facility has now been increased from £48m to £70m, £14m of which was transferred from another facility and £8m of which is new money.
In a statement the company said it had replaced four original tranches of debt – two of which were used for operating working capital and two (the B1 and B2 facilities) for acquisitions – with three separate loan tranches. These are a single term loan, a revolving credit facility and a bridging loan.
The term loan has been increased to £70m, including an existing £48m term loan facility, £14m transferred from the previous B2 facility (representing the shortfall in proceeds from the sale of the Portland portfolio), and an £8m increase in the funds available to the company.
The final repayment date is June 30 2011, with the first amortisation payment of £5m due on March 31 2009.
The revolving credit facility of £36m finances working capital, the amount is unchanged and the facility is available up to June 30 2011. A £12m revolver has been put in place to cover the period from December 22 2008 to February 22 2009 to meet seasonal working capital requirements during the Christmas and new year period.
Southern Cross raised £51.8m from the divestment of 16 freeholds during the summer, which allowed debt under its B1 and B2 facilities to be reduced to £33.4m. The B1 and B2 facilities have now been combined and replaced by one bridging loan totalling £19.4m.
The bridging loan is due for final repayment on June 30 2010. It is intended to be repaid from the proceeds of future sales of freeholds.
A £28.8m development facility, proceeds of which will finance five developments, remains unchanged. It is currently drawn to £13.7m.
A revised covenant package has been agreed as part of the refinancing, based upon the company achieving a minimum adjusted Ebitda of £70m for the financial year to September 30 2009.
Directors will not recommend a final dividend for the year ended September 2008 or an interim dividend in respect of the six months to March 2009.
The company has also agreed a sale of the freehold interest in Torrwood Care Centre to Sovereign Property Holdings Limited for a cash consideration of £7.8m. Proceeds will be used to pay down £6.2m of the development facility and to part repay the drawings on the revolving credit facilities.
Four Seasons Health Care Group
last week entered into a new standstill agreement with its senior lenders until January 22 next year. It follows an earlier standstill agreement in September.
Four Seasons was bought in a £1.4bn LBO in 2006 led by Qatar Investment Authority-backed financial sponsor Three Delta. The deal was backed by a debt package made up of 11 separate tranches. QIA has now walked away from the business, after seeing its £100m equity investment wiped out.
The standstill agreement does give the company a respite, and more importantly creates more time for the mix of debt investors to work towards agreeing a consensual restructuring of the group’s debt, paving the way for a debt for equity swap.
While the group said talks were constructive and lenders supportive, sources close to the situation said the mix of lenders and the complexity of the capital structure made securing a consensual agreement particularly slow going, as investors jockeyed for position.
Four Seasons is the UK’s third-largest care home operator. It has an outstanding debt package of about £1.5bn, which has been strangling the company over the course of 2008.
In September, a £900m refinancing deal put forward by Royal Bank of Scotland was rejected by the other creditors.