“Britain’s second biggest care home operator was made to borrow money through a very expensive loan from its private equity owner in a deal designed to extract £890m in cash from the struggling business.
The disclosures are likely to raise fresh concerns over the future of Four Seasons Health Care, which operates more than 300 care homes across the UK, and has been drowning in debt.
Described in reports as teetering on the brink of ruin, Four Seasons has been hammered by cuts to council care budgets brought on by years of austerity. This month, its private equity owner, Terra Firma, will plead with lenders to approve a financial rescue package.
However, filings in the tax haven of Luxembourg and data from the Paradise Papers reveal how Terra Firma hoped to make a vast profit from the business after acquiring it in 2012.
Four Seasons was made to borrow £220m from Terra Firma subsidiaries. The repayment terms were huge – 15% interest a year, on a compound basis, over 10 years. By 2022, when it was due to be repaid, Four Seasons would have owed its controlling shareholder four times the original sum.
The debt was later written off because of the financial struggles at Four Seasons. However, the bond stated a nominal repayment value of £890m. The intention seems to have been to extract profits from any future sale of the business largely tax-free – a manoeuvre that will raise concerns about whether buyout groups are suitable owners for businesses that form a key part of Britain’s care infrastructure. …”