FINANCE: Formation Capital is buying UK care homes operator NHP for £477.7m, bringing to an end a protracted legacy CMBS workout.
The US investor, with funding from US REIT HCP, is taking control of the former Southern Cross portfolio, which comprises 226 care homes, located primarily in England and Scotland.
The execution of contracts for a sale marks a turning point for the UK’s third-largest care home operator following a period of considerable uncertainty over the future of the business and its assets.
The deal comes six years after the £1.17bn Libra whole loan secured on the NHP care home business and assets, operated by HC-One, went into default.
Circa £638m of this loan was securitised by the Titan Europe 2007-1 (NHP) Limited CMBS.
Following a loan event of default in 2008, the Libra Whole Loan was moved into special servicing and subsequently failed to repay on its maturity date in 2009.
The payment default was followed by a failed attempt to implement a consensual debt restructuring and the collapse of Southern Cross, the care home business’s original principal tenant.
In 2011, HC-One took over the business with the aim of stabilising its trading performance.
In September 2013, the special servicer Capita Asset Services, embarked on a possible disposal of the business.
This was delayed initially due to court proceedings relating to the determination of the controlling party and an alternative proposal put forward by certain creditors that was subsequently rejected by the majority of the class A noteholders.
The sales process was delayed again in August 2014 in connection with assertions by the swap provider that the special servicer did not have the power to release certain guarantees and indemnities.
The swap provider, NHP and bidders ultimately reached a consensual resolution in relation to the issue of the release of the guarantees and indemnities, in a process advised by Brookland Partners.
The debt specialist also led negotiations with the class A noteholders, the note trustee and the issuer in relation to obtaining controlling party consent and coordinated the restriction of more than 75% of the class A noteholders for the purposes of passing a written resolution to affirm their support for the sale and to direct the controlling party to give its consent.
