18 July 2011 Last updated at 15:49 ET

Southern Cross sees third of care homes rescued

The new company is hoping to run a third of the homes once run by Southern Cross

The owner of a third of the Southern Cross-run care homes says it will form a new company to run them itself.

NHP, the owner of 249 of the 752 homes, said it has provisional agreement to form a new company with Court Cavendish, a specialist in turning around healthcare businesses.

Court Cavendish is headed by the former boss of the Priory chain of clinics, Dr Chai Patel.

The homes had been facing an uncertain future after Southern Cross collapsed.

The two groups said staff working at the homes would continue in their posts.

Dr Patel, who sold his Priory chain of rehabilitation clinics in 2005, said: "We hope this announcement is the start of bringing to an end the uncertainty that residents, their families, and staff in all the homes have had to endure over the last few months."

Difficulties

Darlington-based Southern Cross is the UK's largest care home operator with 31,000 residents.

It ran into difficulties when it said it was unable to pay its rent bills to its landlords.

Occupancy levels and fees from local authorities had been falling, partly as a result of the weakened economy.

The group had tried to negotiate a deal with its 80 landlords, but all of the owners of its properties refused the plan leaving Southern Cross with no choice but to announce it would shut down.

NHP said the new company will rent the same properties, but will not be subject to the financial uncertainty that dogged Southern Cross.

It is holding on to £14m of interest payments due this month and a further £14m due in October to provide funding for the new operator, which is due to take over control in October after a four-month handover period.

'Good governance'

Paul Thompson, NHP Director, said: "News of this course of action and the ring fencing of these sums is a very positive development for all those who currently reside in, or who have family residing in, homes owned by NHP.

"It is the start of a new era of stability, planning and good governance."

Mr Thompson also thanked Capita, which represents NHP's lenders, for agreeing to allow the interest payment moratorium.

Both NHP and Court Cavendish said in their statements that with the operator, Court Cavendish, having a stake in the business, one of the "anomalies" of the current structure had been removed and the interests of both the property company and the operating company would be in alignment in future.

Dr Patel said: "The country cannot afford another company to go through what happened to Southern Cross."

It will continue to use back office services provided by Southern Cross.

Landlords of another 250 of Southern Cross's homes have decided to take them back and operate them themselves.

The position of the final third of the 752 homes is undecided.

Negotiations are continuing with their landlords.