Southern Cross still selling

09/10/2008 Robert Tyerman

Care home group Southern Cross is talking to more potential property buyers after selling 16 freeholds for £51.8 million.

The fully listed company, which defaulted in June on a payment on a £46 million loan facility, says it has reduced its borrowings to £33.4 million and is still negotiating ‘long-term bank financing’. According to Southern, Britain’s largest care home operator, these financing issues are scheduled to be resolved by the end of this month.

Chairman Ray Miles is taking executive responsibility at Southern following the departure of chief executive Bill Colvin, one of a few directors who sold big lines of stock in all innocence well before the default pulverised the share price. The board is ‘actively continuing its search’ for a replacement for Colvin.

On the trading front, apart from negotiating the sale of more freehold properties, Southern, which increased earnings 40 per cent to £55 million in the 40 weeks to 6 July, says its mature home occupancy reached 90.5 per cent at the end of September. The company has added a net 62 homes and 3,120 beds, increasing its bed capacity nine per cent.

Southern Cross shares, which plunged from a 634.5p high to 47.75p after the default, have rallied to 84.75p,valuing the company at £159 million. If the refinancing talks do succeed despite the credit crunch, they could recover further.

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