Care home operator's controversial property leases were 95% in place by the time we took it over, says private equity firm
The row over the crisis at care homes group Southern Cross is deepening as union leaders escalate their attempts to pin the blame for the fiasco on the group's former owner, private equity group Blackstone.
The GMB staged a protest in central London on Thursday outside a meeting attended by private equity companies. Blackstone itself issued a statement, meanwhile, denying that it had anything to do with Southern Cross's problems.
The care homes operator said on Wednesday that it was withholding 30% of its rental payments to landlords over the next four months as it seeks to restructure itself. The company has seen its revenues squeezed in the last 12 months amid cuts in public spending, while rising rents and other costs have pushed it into the red.
Blackstone's statement said: "Blackstone has not controlled Southern Cross since its IPO five years ago in July 2006. During Blackstone's ownership, the company 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."
It added that it was not responsible for Southern Cross's property problems. "Of the 578 care homes operated by Southern Cross at the time of its IPO in 2006, approximately 95% were operated under leases entered into prior to Blackstone funds' investments. The remaining 5% were sold and leased back by Southern Cross… in 2005."
Southern Cross is responsible for looking after 31,000 elderly residents across almost 750 care homes. It is unclear how the group's 80 landlords are likely to react to the withholding of some of their rental payments, but the company could end up in administration if they reject its restructuring plans.
Union leaders have called for politicians to step in. GMB general secretary Paul Kenny said: "These kings of private equity meet in secret, excluding the press and the public. What further ravages are they planning for the British economy and British jobs?"
The British Venture Capital Association said that private equity was not to blame, and that private investment was essential in the provision of care. Mark Florman, its chief executive, said: "With a growing need and constrained public funding, it is imperative that private sector investment continues to flow into the sector."