Landlords throw Southern Cross a lifeline

Embattled Southern Cross Healthcare (SCHE) has been thrown a lifeline by its landlords in a deal made on Monday night.

An emergency rescue plan was agreed with the landlords' committee which represents the 80 landlords who own the company's 751 care homes.

It means that no care homes will be closed in a transition period that will last until at least October.

Southern Cross shares soared for the second day running, rising more than 66% in morning trading on Tuesday as the news was welcomed by investors.

The proposals include an overhaul of management at the reworked company, which could be less than half the size of the existing Southern Cross and operate under a different name.

Daniel Smith of Grant Thornton, chairman of the landlords' committee, said property owners have "agreed in principle that they will make significant financial concessions in order to achieve a sustainable solution", which is understood to refer to short-term rent cuts and longer-term lease changes with Southern Cross or new operators.

He added: "Our overriding concern at this time remains minimising disruption and concern for residents and their families."

The proposals are believed to include an agreement for some kind of long-term rent reduction on the condition that key creditors write off some of the company's debts.

The plans will be tabled tomorrow in a meeting with the government and the company's main lenders, including Barclays (BARC) and taxpayer-backed Lloyds Banking Group (LLOY), which are understood to be owed about £40 million between them.

It is hoped that HMRC will also be supportive over the £20 million it is owed by Southern Cross.