LONDON, June 1 (Reuters) - British care home operator Southern Cross <SCHE.L> believes it can win support from enough of its landlords to stay in business after it decided to withhold some rental payments in a bid to stay afloat.
The company, which provides residential and nursing care for about 31,000 elderly people in the United Kingdom, said on Tuesday it would stop paying nearly a third of its rental bill while it attempts to thrash out a rescue package. [ID:nRSe5705Ha]
Bondcare, the owner of 40 of Southern Cross's 750 homes, will not support the proposal, according to The Financial Times.
However, the company said on Wednesday it remained hopeful the plan would succeed, adding that negotiations with its landlords would continue through the summer.
"We are confident a critical mass will support the deal," a spokesman said.
The company also said it was talking to the Department of Health and its lenders.
Southern Cross has been crippled by a financial structure under which it sold its property and rented it back under long-term leases, which included annual rent rises of about 2.5 percent.
The model became untenable, however, when revenues went into decline after government cutbacks resulted in declining local authority admissions and a squeeze on fees.
The group, which has a market value of 15 million pounds after its shares collapsed, this month posted a pretax loss of 311 million pounds (${esc.dollar}511.8 million) for the six months to end-March, and said it was in a "critical financial position".
Conservative MP Stephen Dorrell, who chairs the Commons Health Select Committee, told the BBC on Wednesday that there was a need to ensure stability and a high quality of care for Southern Cross's residents.
"It is not the taxpayers' job to fund the losses that have been suffered by the people who invested in Southern Cross," he said.
"(But) what we need to do is ensure the care provided to the people who are resident in Southern Cross homes is sustained and those people's needs are met."
(${esc.dollar}1=.6076 Pound)
(Reporting by Paul Sandle; editing by Paul Hoskins and Andrew Callus)
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