Minority bondholders react angrily to deal conditions tabled by troubled firm’s biggest lender, H/2 Capital Partners
Talks over the future of loss-making Four Seasons Health Care, which looks after 17,000 elderly and vulnerable people, hit a fresh snag after minority bondholders claimed the company’s biggest lender is trying to push through measures that are not in the firm’s best interest.
US investment firm H/2 Capital Partners, which owns the majority of Four Seasons’ bonds, has agreed a “standstill” deal that defers crippling interest payments, allowing time for a restructuring of the debt-laden company.
Minority bondholders support this but a group holding about £100m of the debt have been angered by conditions attached to the deal, drawn up by H/2 and Four Seasons without their involvement.
The row threatens to complicate rescue talks, which are already fraught due to icy relations between H/2 and Terra Firma, the private equity group that still owns Four Seasons. Terra Firm is seeking an exit after austerity cuts to local authority social care budgets and increased nursing costs rendered its debt-fuelled model unsustainable.
Cheyne Capital, which has lent money to Four Seasons since 2006, said the standstill agreement includes terms that “prejudice the contractual rights and position of the minority bondholders as well as the company”.
“If H2 cannot reach agreement with the company on terms that do not adversely impact the rights of the minority bondholders, then we would urge the company to seek alternative funding suitors to work with,” it added.
Continuing with the existing terms would limit Four Seasons’ ability to secure the best restructuring deal during rescue talks due to continue over the next few months, the lender warned.
M&G, the investment arm of global insurer Prudential, is thought have similar concerns to Cheyne but declined to comment. H/2 also declined to comment.
Sources close to minority bondholders stressed that the dispute will not put at risk the survival of the company.
Cheyne and fellow lenders are expected to argue that the agreement cannot be legally applied, which could complicate ongoing efforts to restructure the company’s long-term finances.
The dispute revolves around several key clauses, one of which prevents Four Seasons from repaying any other creditors without express permission from H/2.
If Four Seasons were offered new cheap loans as part of the upcoming restructuring effort, it could not accept them unless H/2 allowed it to repay existing loans first, one source said.
The agreement also allows H/2 to force Four Seasons to refinance its debt with an entity nominated by the US company.
H/2 would also have the power to stop Four Seasons from paying interest to bondholders holding a higher ranking debt without paying those with lower ranking bonds.