The Southern Cross is a constellation (group of stars) that is found in the southern region of the night sky. It is the most commonly known, and most easily identifiable of all the southern constellations. It is particularly important to the Aboriginal people working in Australia and the following tale is handed down.
“There was a large rock cod (fish) named Alakitja who lived in the waters of the river known as the milky way. On his way to his favourite water hole he carefully avoided the sky people’s fish traps. He swam past the magnificent white blooms of the countless water lilies. These flowers shone so brightly that the people on earth could see them. They became known as stars. When he finally completed his journey and reached his waterhole he rested away from the harsh sun, under a large rock.”
Could this be allegorical for Southern Cross Healthcare the leading provider of Care Homes in the UK, with over 720 care homes and 37,000 beds nationwide? It is now very much in a dark place having announced its intention to “defer” payments to Landlords. In plain speak read can’t pay, rather than won’t pay.
It is to all intends bust as indicated by the share price. It has broken its banking covenants and is likely to be forced into administration.Will the government be forced to step in?
We discussed the background in an earlier article but this is one situation the Coalition can not duck and leave to the markets to sort out as some of the problems are of its own making. Certainly the shareholders of Southern Cross deserve to lose their shirts but the residents must be protected and it might require nationalisation to sort out the mess. The existing Landlords will suffer in some form as the current rental structures are unsustainable but they would get a stronger covenant, if a lower yield, with state involvement.
With imagination and given time, securitization of some of the asset portfolio could be looked at to create long term liabilities against long term investments but it requires action now, not later before staff start to defect, affecting the quality of care.
This could be one hell of a mess and another example of privatising profits in the good times and nationalising losses in bad times but this is a case of protecting the innocent , akin to the depositors guarantee provided by the government to investors in Lloyds and RBS and is a much more deserving cause.
Mr Cameron needs to put a few top flight business lawyers in a room with a couple of investment banks and where there is a will there is a way but the time for action is now.
Author: Chris Slay
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