The financial shuffle
At Four Seasons, the speed of change was dizzying. From 2004 to 2017, big money came and went, with revenue at times threaded through multiple offshore vehicles. Among the groups that owned Four Seasons, in part or in its entirety: British private equity firm Alchemy Partners; Allianz Capital Partners, a German private equity firm; Three Delta, an investment fund backed by Qatar; the American hedge fund Monarch Alternative Capital; and Terra Firma, the British private equity group that wallowed in debt demands. H/2 Capital Partners, a hedge fund in Connecticut, was Four Seasons’ main creditor and took over. By 2019, Four Seasons was managed by insolvency experts.
Pressed on whether Four Seasons would exist in any form after the current sale of its property and businesses, MHP Communications, representing the company, said in an email: “It is too early in the process to speculate about the future of the brand.”
Vivek Kotecha, an accountant who has examined the Four Seasons financial shuffle and coauthored the Unison report, said private equity investment – in homes for older residents and, increasingly, in facilities for troubled children – is now part of the financial mainstream. The consulting firm McKinsey in 2022estimated that private markets manage nearly $10 trillion in assets, making them a dominant force in global markets.
“What you find in America with private equity is much the same here,” said Mr. Kotecha, the founder of Trinava Consulting in London. “They are often the same firms, doing the same things.” What was remarkable about Four Seasons was the enormous liability from high-yield bonds that underpinned the deal – one equaling $514 million at 8.75% interest and another for $277 million at 12.75% interest.
Guy Hands, the high-flying British founder of Terra Firma, bought Four Seasons in 2012, soon after losing an epic court battle with Citigroup over the purchase price of the music company EMI Group. Terra Firma acquired the care homes and then a gardening business with more than 100 stores. Neither proved easy, or good, bets. Hands, a Londoner who moved offshore to Guernsey, declined through a representative to discuss Four Seasons.
Mr. Kotecha, however, helped the BBC try to make sense of Four Seasons’ holdings by tracking financial filings. It was “the most complicated spreadsheet I’ve ever seen,” Mr. Kotecha said. “I think there were more subsidiaries involved in Four Seasons’ care homes than there were with General Motors in Europe.”
As Britain’s small homes were swept up in consolidations, some financial practices were dubious. At times, businesses sold the buildings as lease-back deals – not a problem at first – that, after multiple purchases, left operators paying rent with heavy interest that sapped operating budgets. By 2020, some care homes were estimated to be spending as much as 16% of their bed fees on debt payments, according to parliamentary testimony this year.
How could that happen? In part, for-profit providers – backed by private-equity groups and other corporations – had subsidiaries of their parent companies act as lender, setting the rates.
Britain’s elder care was unrecognizable within a generation. By 2022, private-equity companies alone accounted for 55,000 beds, or about 12.6% of the total for-profit care beds for older people in the United Kingdom, according to LaingBuisson, a health care consultancy. LaingBuisson calculated that the average residential care home fee as of February 2022 was about $44,700 a year; the average nursing home fee was $62,275 a year.
From 1980 to 2018, the number of residential care beds provided by local authorities fell 88% – from 141,719 to 17,100, according to the nonprofit Centre for Health and the Public Interest. Independent operators – nonprofits and for-profits – moved in, it said, controlling 243,000 beds by 2018. Nursing homes saw a similar shift: Private providers accounted for 194,100 beds in 2018, compared with 25,500 decades earlier.