Terra Firma calls on H/2 to accept Four Seasons proposal

The development comes one month after Terra Firma offered to write off its remaining investment in Four Seasons following an alternative financing proposal put forward by H/2, the company's major creditor.

The GP is keen for the proposal to be accepted as soon as possible, with the elderly care home operator facing an interest payment on 15 December that it is struggling to meet, according to a statement. Four Seasons owes £525m on two bond tranches, according to unquote" sister publication Debtwire.

Terra Firma also said in a statement that it has made a "direct proposal" to H/2, urging it to agree to a standstill and forbearance ahead of the 15 December deadline, which it says would enable a "consensual restructuring among all parties".

The GP's offer to hand over its stake is subject to assurances related to 24 properties that sit outside the group, which will themselves be subject to a court case that is scheduled to be heard next year. The firm says it has requested H/2 works alongside it in an application to the courts to expedite the hearings.

To date, both the proposals for a consensual restructuring and for collaboration on expedition of the court case have been rejected, according to the statement.

Terra Firma had originally supported a company proposal in which it would have made a £136m cash injection that included an element of debt-for-equity. However, H/2 said the proposal would have reduced the debt burden by an "inadequate" £77m and has proposed a counter-offer that would reduce the debt by £247m.

H/2's proposal gave Terra Firma the option of investing up to £45m as part of a £135m equity funding round that would reportedly see the GP retain an 11% stake. However, an earlier statement by Terra Firma suggested the firm will not exercise the option and will instead transfer its remaining interest for a nominal sum.

According to a statement issued at the time of H/2's counter-proposal, the hedge fund holds "the substantial majority of the senior secured notes and more than 75% of the senior notes" of the business.

As part of the revised proposal, H/2 said it would inject £135m of equity financing into the business to reduce debt and would "assume other ownership responsibilities". Additionally, H/2 offered to defer interest payments until March in order to facilitate the completion of the deal.

The creditor has proposed the injection of £25m to fund the refurbishment of Four Seasons' existing sites and £15m for a staff reward programme.

Terra Firma acquired Four Seasons in April 2012 from Royal Bank of Scotland and other banks in a deal valuing the business at £825m. The GP wrote down its investment in the group to a nominal value in 2015, according to the aforementioned statement, in recognition of "the challenges the business had faced".

In addition to its financial troubles, Four Seasons also faced a backlash in 2015 when the Care Inspectorate watchdog found a resident had been the subject of "highly inappropriate" and "unacceptable" treatment from members of staff.

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• Topics
• Exits
• Restructuring
• UK / Ireland
• Healthcare
• United Kingdom
• Terra Firma