Four Seasons Health Care is in deep financial trouble. Its £1.5bn of borrowing is due for refinancing in the next three months. It faces a covenant on debt and has breached it already. One of Britain’s biggest nursing and care home groups, it was bought by a Qatari investor 2 years ago.

The financial crisis has triggered tensions between Paul Taylor, founder of Four Seasons’ owner Three Delta and the Qatar Investment Authority. The situation is heading to the worst. Three Delta and its lenders have so far not succeeded in tackling the serious issue of e refinancing. Their problems are further aggravated by the decision of banks to withdraw lending against commercial property which was the main asset base for Four Seasons.

The company has its £1.24bn senior debt due on September 2, and paid a small sum  to avoid breach of covenant on its facilities.  If the company fails to raise enough debt to refinance its loans, the private equity owners are not likely put up more money to ease the situation.

Attracted by the growth opportunities in health care sector, private equity firms have put in their heavy investments. Since January 2005, the sector registered 370 deals worth £33.3bn. Despite strong industry fundamentals, Four Seasons struggled mainly due to lower occupancy rates. It averaged 84 per cent against the industry average of 90-92 per cent.

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