Realist, not conformist analysis of the latest financial, business and political news

Four Seasons Care Homes Goes Bust – Zero Difference To Any Care Home Or Resident

We can note that Guy Hands doesn’t seem to be having all that much luck with his investments these days for Four Seasons care homes has just called in the administrators. Oh dear, what a pity etc. Stand by for the flood of articles that will tell us all that private business really shouldn’t be doing this sort of thing, instead it should be the state directly taking care of us in our dotage. And if that doesn’t scare the fecal matter out of you nothing will.

The actual truth being that this bankruptcy will make no difference whatsoever to any care home or the life of any resident in one:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Care home giant Four Seasons on brink of administration
The UK’s second biggest care home operator is expected to call in administrators later on Tuesday, Sky News learns.[/perfectpullquote]

It has actually happened. But The Guardian decided to worry:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Four Seasons care home operator on brink of administration
About 17,000 residents and 22,000 jobs at risk as rescue talks look likely to fail[/perfectpullquote]

The risk is in fact nothing. As it’s not the operating companies which have gone into administration but the holding ones.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] One of Britain’s largest care home groups, Four Seasons Health Care, has gone into administration. Two of the holding companies behind the firm appointed administrators on Tuesday after struggling to repay their debts. The group serves about 17,000 residents and patients and employs some 20,000 staff. Four Seasons said the move would not affect care arrangements or lead to the closure of homes. [/perfectpullquote]

So, why won’t things change, why is nothing at risk? Because it’s not those operating companies in administration.

For those who haven’t a clue about business – say if you’re a member of the Labour Party – an operating company is one that does something. A holding company is one that just sits there and owns stuff.

Now to debt. Say, the mortgages on the care homes. Or borrowing a bit to repaint them. Those debts will be owed by those operating companies. So too the accounts outstanding with the butchers and all that. At this level the companies aren’t affected at all.

The debts of the holding companies are really the debts of having bought the care homes in the first place. And that’s what has gone bust. It’s not that the care homes have. It’s that the people who borrowed to buy them can’t pay back their loans out of the surplus cash flow.

All that’s happened here is that one group of spivs who were chancing their arm have lost their cash. The actual care homes are just fine. As are the 17,000 residents.

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Jonathan Harston
Jonathan Harston
5 years ago

Back before the Cabinet system was forced on local government, and when national politicans did active service in local government instead of stepping-stone their way into high office, they would have understood this by analogy with the old Department X Policy Committee and Department X Service Committee. Sweeping those away in the name of streamling, and national politicos going straight from PPE to Spad to MP, all the hard-learned experiencial knowledge is being swept away.

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