There are fears that if the local authorities cannot pay larger fees or if the government does not help the sector find capital, the credit crunch may force the closure of care homes.
Large care providers such as Four Seasons and Southern Cross as well as small care home companies that have taken out loans against future earnings are likely to be affected.
Southern Cross Healthcare, one of the biggest care home operators in the UK with 735 homes and 37,425 beds for elderly and disabled people, agreed an extension of its loan facilities to give the company time to sell off freehold property assets in order to refinance its remaining debt, which has been estimated as being £80m.
Four Seasons Healthcare, another major player in the care sector with over 300 homes and 17,000 beds, has also experienced debt refinance problems. The company failed to meet a £1.5bn repayment date in September. The debt has been temporarily frozen, with an extension ending in January, to give the creditors time to negotiate a debt restructuring deal.
It is thought that falling house prices reducing the funds available to those who pay for themselves coupled with the local authorities' tight purse strings, will lead to a slowdown in admissions and lower occupancy rates.
