Southern Cross completes refinancing

31/10/2008 Robert Tyerman

Care home group Southern Cross has completed a £137.4 million refinancing and sold a Somerset care centre for £7.8 million.

The fully listed company, which in June defaulted on a payment on a previous £46 million loan facility, has reached agreement with its banking syndicate for its £48 million term loan facility to be increased to £70 million, with £14 million transferred from other facilities and £8 million of new money. Southern’s existing £28.8 million development facility, set up to finance five projects, remains in place, with about half drawn.

The banks have also agreed to revise the company’s covenant package, provided Southern, which increased earnings 40 per cent to £55 million in the 40 weeks to July, achieves a minimum earnings before interest, tax, depreciation and amortisation of £70 million in the year to September 2009. Southern has also sold its new Torrwood care Centre in Somerset for £7.8 million, to pay down some of the development facility and some drawings on its revolving credit facilities.

Chairman Ray Miles, who assumed executive responsibility after the departure of chief executive Bill Colvin, proclaims the refinancing ‘puts Southern Cross firmly back on track’. The shares, which collapsed from 606p last November to 55p earlier this month, have rebounded to 86.25p and could rally further if progress is maintained.

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