Friday, 3 June 2011

Government ‘could end up supporting Southern Cross’

The government is likely to have to bail out the care home operator Southern Cross Healthcare, a leading academic has told Public Finance.

My comment: Here's the rub, when a public body outsources functions to a private company they should always bear in mind that whilst the private company takes the profits the risk always remains with the public body. In essence companies like Southern Cross are in a win win situation. During the good times they reap all the rewards and during the bad times the taxpayer is left to pick up the bill to keep them afloat until the good times roll again. 

Very similar to the Banking scandal when public money was used to support private businesses because it is not in the interest of government to allow them to fail. 

So the moral of this argument is why are public bodies outsourcing functions which allow a private company to keep the profit but leave the taxpayer with all the risk. Surely it would be better if one or the other had both the risks and rewards.

Read the full story from the source Carer Watch's Blog

UPDATE 4/6/11: Southern Cross predators sold off almost 300 homes to RBS.

The full extent of U.S. private equity firm Blackstone’s profiteering at the expense of the elderly and the vulnerable is laid bare today.

It was already known that the firm made around £640million through the float of the Southern Cross care home business on the stock market in summer 2006.

But the Mail has now discovered that just three months earlier Blackstone pocketed £1billion from selling 294 Southern Cross care homes to the Royal Bank of Scotland.

That deal, while making a fortune for Blackstone’s bosses at the peak of the property boom, saddled Southern Cross with expensive long-term rent commitments it can no longer afford.

The revelation makes a mockery of Blackstone’s claims that it was not involved in asset-stripping the care home operator in the attempt to make a quick profit.

My comment: £1.6 billion sucked out of Southern Cross by private investors leaving the taxpayer to pick up the pieces.

UPDATE (2) 4/6/11: The Blair aide who sits on the board.

Some of the blame for the problems of Southern Cross was yesterday laid firmly at the door of the board of directors – who include Tony Blair’s former policy chief Sally Morgan.

Now Baroness Morgan of Huyton, she heads the education watchdog Ofsted, and is a non-executive director of Southern Cross.

My comment: Full circle back to the incompetence of a public servant allowinbg it to happen. 

Read the full story from the source Mail on Line

UPDATE (3) 5/6/11: People who made a mint out of Southern Cross.

Graham Sizer, 42, sold his shares for £7.9million in December 2007.

Chairman William Colvin, 53, made £6.6million selling shares on the same day in 2007 as Mr Sizer.

John Murphy, the chief operating officer, also upgraded his property that year to a £500,000 detached home in Troon, Ayrshire.

A fourth director, chief executive Philip Scott, made £11.1million selling all his shares on the same day in 2007. The share price then was 550p but is now just 6.3p.

Last night, Mr Sizer said: 'The company was making a big profit when I left. What changed was that occupancy fell from about 90 per cent to 80 per cent. That is why the company is in trouble.'

My comment: I think the reason for their problems has more to do with the sale and leaseback of  their care homes which added an unsustainable amount of rent to their overhead. It was only a matter of time before the company went belly up, so what would you do if you owned shares and knew what was going to happen? SELL, SELL, SELL well before the bottom drop out of the share price..  

Read the full story from the source Mail on Line

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