Companies: SCHE   

Leading care home group Southern Cross has missed the repayment date on £46 million of banking facilities.

Shares in fully listed Southern Cross have plunged 62 per cent today to 118.75p, wiping £325 million off the company’s stock market value, after its failure to sell certain property assets ahead of today’s repayment date triggered the present crisis. Finance director Jason Lock is leaving immediately, to be replaced by Richard Midmer, former finance director of care home investment group NHP, as Southern Cross, steered by chief executive officer Bill Colvin, continues to talk to its banking syndicate about sorting out its problems.

The company, which as recently as May was confident enough to increase its acquisition facility by £48 million to £108 million and raise its interim dividend 50 per cent, says bed occupancy rates have risen to 90 per cent, but not as soon as expected. Central government funding to local authorities for social care came through later than in previous years, which has dented occupancy rates, while Southern’s specialist subsidiary, Active Care, has performed ‘significantly below forecast’ and hired a replacement management team.

The company has drawn £82 million of two syndicated credit facilities, of which the £46 million in question was one. Southern says it has received ‘indicative offers’ for some of the assets it has been hoping to sell and has been granted an extension to the repayment date and a waiver of an expected breach of a financial covenant until 28 July.

Southern Cross shares have now lost 80 per cent of their value since last November and shaken investors’ confidence in healthcare as a defensive haven in recessionary times.

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Southern Cross Healthcare Group	LSE	£191.36m	101.75p	-1.00p
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