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Commercial Property News
Southern Cross ease their troubles with further sales and leasebacks of care homes and loses CEO
Southern Cross,the largest provider of care homes and long term care beds in the UK,has raised more than £20m to help pay down debt – and announced the departure of chief executive Bill Colvin.
The troubled company, which operates around 700 Care Homes has seen its share price fall from around 600p less than 12 months ago, to as low as 48p during July, after a severe profits warning, but has since rallied.
Yesterday, investors welcomed the news of more property sales, and Mr Colvin’s departure, with Southern Cross seeing a 7% improvement in the course of the day’s trading to close at 152p.
The company said last month it needed to pay off a £46m debt facility by the end of October, and this latest property sale is another step towards achieving that.
Mr Colvin, who took over as chief executive in January this year, after three years as chairman, will remain in his current post until the re-financing is complete.
Southern Cross has sold a total of 7 care homes to three separate companies, Kirkhollow Limited, Keybank Limited and Kenplaid Limited, for a total of £20.7m.
The company said the property sold had an asset value of £23.7m, hence the deal struck sees the business incur a loss of £3m. Southern Cross will now pay annual rent of £1.7m on the seven homes sold.
The discounted sale price is said to reflect the current state of the property market.
The proceeds from the property sales will be used to help pay off Southern Cross’s “B1” and “B2” credit facilities which were put in place earlier this year to fund additional acquisitions.
These latest sales follow Southern Cross last week selling 9 homes to a subsidiary of Daejan Holdings plc for £31.1m.
The total amount now owed by the company for the B1 and B2 facilities stands at £33.4m, with Southern Cross still aiming to sell off and lease back a further 13 care homes.
Chris Glasper, an analyst with Brewin Dolphin in Newcastle, said at the end of the day the share price had fallen, pointing out that it was still well below the 600p level of November last year, “so there is a lot of destruction of shareholder value there, sadly”.
“They are being forced to accept lower prices for the freeholds, and pay higher rents (than previously).” Mr Glasper said the value of Mr Colvin’s departure would only be assessed once Southern Cross had found his replacement. He said: “This decision creates uncertainty in the short term. It depends very much on who his replacement is, whether it’s a positive or not.
“We don’t know who the new appointment is – whether it’s internal or external. There is a need to draw a line under what has happened and move the business forward.”
Mr Colvin will remain as chief executive for the time being to work on the refinancing of the company.
Ray Miles, chairman of Southern Cross, said: “Bill has provided much appreciated management continuity since taking on the chief executive role at the beginning of this year and has been one of the key architects of the transformation of Southern Cross over the last several years. We are all very grateful to him for what he has done, and continues to do, for the company.”
The troubled company, which operates around 700 Care Homes has seen its share price fall from around 600p less than 12 months ago, to as low as 48p during July, after a severe profits warning, but has since rallied.
Yesterday, investors welcomed the news of more property sales, and Mr Colvin’s departure, with Southern Cross seeing a 7% improvement in the course of the day’s trading to close at 152p.
The company said last month it needed to pay off a £46m debt facility by the end of October, and this latest property sale is another step towards achieving that.
Mr Colvin, who took over as chief executive in January this year, after three years as chairman, will remain in his current post until the re-financing is complete.
Southern Cross has sold a total of 7 care homes to three separate companies, Kirkhollow Limited, Keybank Limited and Kenplaid Limited, for a total of £20.7m.
The company said the property sold had an asset value of £23.7m, hence the deal struck sees the business incur a loss of £3m. Southern Cross will now pay annual rent of £1.7m on the seven homes sold.
The discounted sale price is said to reflect the current state of the property market.
The proceeds from the property sales will be used to help pay off Southern Cross’s “B1” and “B2” credit facilities which were put in place earlier this year to fund additional acquisitions.
These latest sales follow Southern Cross last week selling 9 homes to a subsidiary of Daejan Holdings plc for £31.1m.
The total amount now owed by the company for the B1 and B2 facilities stands at £33.4m, with Southern Cross still aiming to sell off and lease back a further 13 care homes.
Chris Glasper, an analyst with Brewin Dolphin in Newcastle, said at the end of the day the share price had fallen, pointing out that it was still well below the 600p level of November last year, “so there is a lot of destruction of shareholder value there, sadly”.
“They are being forced to accept lower prices for the freeholds, and pay higher rents (than previously).” Mr Glasper said the value of Mr Colvin’s departure would only be assessed once Southern Cross had found his replacement. He said: “This decision creates uncertainty in the short term. It depends very much on who his replacement is, whether it’s a positive or not.
“We don’t know who the new appointment is – whether it’s internal or external. There is a need to draw a line under what has happened and move the business forward.”
Mr Colvin will remain as chief executive for the time being to work on the refinancing of the company.
Ray Miles, chairman of Southern Cross, said: “Bill has provided much appreciated management continuity since taking on the chief executive role at the beginning of this year and has been one of the key architects of the transformation of Southern Cross over the last several years. We are all very grateful to him for what he has done, and continues to do, for the company.”
Fri, 5th Sep 2008