Formation Capital enters binding to acquire £478m former Southern Cross nursing homes

Formation Capital has entered into a binding agreement to acquire shares in the company, and all subsidiaries, which owns almost 300 former Southern Cross UK care homes for an all-cash £477.67m.

The NHP care home business, the UK’s third largest care home business, was secured by a £1.17bn Libra whole loan, of which £638m was securitised by the Titan Europe 2007-1 (NHP) Limited CMBS, which failed to repay at maturity in 2009.

The payment default was followed by a failed attempt to implement a consensual debt restructuring and the collapse of Southern Cross, the care home business’s original principal tenant.  

In 2011, HC-One took over the business with the aim of stabilising its trading performance.

The sale is estimated to return £457.58m to noteholders in the Titan Europe 2007-1 (NHP) Limited which crystallises just under a 10% loss on the outstanding senior loan balance of £507m.

Capita Asset Services is the special servicer, which appointed Deutsche Bank to manage the sale process and Brookland Partners was as Capita’s financial adviser.

Class A noteholders – including Och-Ziff – have already passed a resolution consenting to the disposal which, earlier this year, Anchorage Capital and Credit Suisse International tried to block.  

The completion of the sale is expected to occur on 12 November.  

In a notice to noteholders published on the Stock Exchange, Capita stated: “The special servicer wishes to inform noteholders that a binding sale and purchase agreement (the SPA) has been executed in respect of the sale of all of the subsidiaries of the borrower, through the sale of all of the shares of NHP Holdco 1 Limited.”

Receivers have been appointed in respect of certain assets of the borrower shortly before entry into the SPA, to facilitate the property disposal.

The appointment of receivers does not affect the care of residents or the jobs of staff within the borrower group; HC-One Limited’s business will continue to operate as usual.

Brookland Partners brokered a consensual resolution with the swap provider, Credit Suisse International, which unlocked the property portfolio sale. 

Nassar Hussain, Principal at Brookland Partners added in the statement: “This has been a difficult and complex transaction for all concerned in recent years and we were pleased to be able to assist with this positive outcome.”

However, the uncertainty over sequential payment of unpaid swap mark to market liabilities remains unresolved.  The remaining complexity which needs to be determined is whether the unpaid swap payments – calculated at £75.6m by Capita and £90.6m by Credit Suisse – rank above or below the class As.

Back in April, a High Court ruling rejected Anchorage Capital’s attempts to block the property portfolio disposal, which already secured class A noteholder approval.

Then in May, a subsequent 11th second attempt to stop the property sale consensually also failed.

About CoStar News

Finance Editor, CoStar News
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