Written Statement - Southern Cross – Update on Restructuring

This statement is being issued during recess in order to keep Members informed. Should Members wish me to make a further statement or to answer questions when the National Assembly returns I would be happy to do so.

In my Written Statement of 12 July I informed Members that Southern Cross had announced that trading in its shares had been suspended and its restructuring process would see the operation of all the company’s care homes being transferred to their landlords and alternative providers of care. This represented a phase in the ongoing process, agreed between the company, its landlords and lenders, for a consensual, solvent restructuring. Discussions to resolve the remaining steps are continuing.

A further announcement was made on 18 July by one of Southern Cross’ landlords, NHP Health Care, who own the majority of the care homes in Wales affected. NHP confirmed that it has retained approximately £14m of imminently due loan interest payments in order to make provision for the working capital requirements of a new operating company that NHP expects to emerge at the end of the current consensual restructuring process. They advised that Court Cavendish, the health and social care specialists currently retained as advisers to NHP, had provisionally accepted its invitation to join NHP in setting up this new operating company. NHP stated that it intends at the end of the agreed four month handover period, to create with Court Cavendish a new operating company in order to put its 249 homes in the UK onto a firm financial footing and to provide certainty and continuity of care.  This new company will continue to rely on the existing Southern Cross staff who manage its 249 homes (including those in Wales) and the back office services delivered by Southern Cross' existing infrastructure to ensure continuity of care and operations.

This latest announcement made has no immediate effect on the provision of care or the operation of care homes. Southern Cross remains in business and will continue to operate all its care homes until transfers to new operators have taken place. We understand that this process is expected to be completed by the end of October. Discussions with the company have emphasised that all parties should set out their plans as swiftly as possible, so as to offer reassurance to residents and families. As these arrangements are finalised progress reports will be issued by the company. We are informed that the transfer of Southern Cross care homes to alternative care operators will be a managed process that ensures continuity of care for residents. Southern Cross has withdrawn its statutory redundancy notice and given an undertaking to care home staff that they will transfer to new operators on their current terms.

I want to make clear that no transfer of homes will take place without new operators having been approved and registered by the Care and Social Services Inspectorate in Wales. The statutory requirements demand that any alternative operators will need to be reputable and experienced care providers that can satisfy CSSIW that they are capable of delivering high-quality care and of meeting all regulatory standards. Discussions between CSSIW and NHP and the proposed new operators will now be taken forward. They, and any other new providers identified who are not currently registered with CSSIW, will be required to make a new application for registration to provide care, which will be subject to full scrutiny and a determination of fitness to provide the service. CSSIW’s principal concern is the safety of service users and it will not compromise on the standards required. Officials continue to maintain close contact with Southern Cross’ senior management and also with the Association of Directors of Social Services Cymru, the Welsh Local Government and Local Health Boards to ensure effective contingency plans are in place.
 
I have been asked whether I am considering measures needed to prevent similar situations from arising again. Options for financial regulation or other measures will be considered as part of the development of the forthcoming Social Services Bill.

Over the summer recess period, there may be further developments in respect of the transition of Southern Cross homes in Wales to new operators. I will ensure that Members are kept informed of any significant progress or change in that process.

There are clear protections in place that cover the situation in relation to Southern Cross. No resident, whether publicly or self funded, will be left without a home or care. In an emergency, a local authority has the powers to provide residential accommodation to anyone who had an urgent need for it. A local authority would continue to provide care for any self-funding resident who was unable to find or arrange care for themselves.