-3x Short China Regulatory News (SCHE)

Monday 11 July 2011

Southern Cross Healthcare Group PLC

("Southern Cross", "the Company" or "the Group")

Restructuring Update

Since 14 March 2011, when the Company announced its intention to seek a financial restructuring of the business, it has frequently reaffirmed its ongoing commitment to preserve continuity and quality of care to its 31,000 residents. To this end, the Company has been working with a Restructuring Committee of its landlords and lenders towards a consensual solution to the Group's difficulties focused on ensuring that residents in all its 752 care homes continue to be cared for and that its employees' interests are safeguarded. 

While the details of the restructuring are not yet settled, the key components are now becoming clear and, accordingly, the Board is providing the following update:

·; All landlords have indicated, through the Restructuring Committee, their intention to leave the Group and a plan is being formulated by the Committee to facilitate the smooth transition of homes to landlords and, where appropriate, their new operators. As part of the plan, in addition to ensuring continuity of care to residents, all payments to trade creditors are to be maintained and all home based staff transferred on their current terms.

·; The portfolios of a number of landlords, who are themselves operators or who have strong links with existing providers, are shortly expected to begin the process of transition to those nominated new operators. Approximately 250 homes are currently contained within this grouping.

·; Landlords responsible for the balance of the properties operated by the Group are currently finalising their plans and further announcements will be made in due course. It is anticipated that several landlords will require the services of the Group's existing operational management and back office functions.

Jamie Buchan, Chief Executive, and his senior team colleagues will lead the operational implementation of the restructuring, liaising closely with all stakeholders to ensure that the welfare of all residents and staff is maintained.

Although still subject to the possibility of further change, it is currently envisaged that the existing Group will cease to be an operator of homes at the end of the restructuring period. It is also anticipated that landlords, lenders and, where appropriate, other residual stakeholders will agree the necessary measures to facilitate the orderly closure of the Group's affairs and that little or no value will be attributable to shareholders. Given this background, and in agreement with UKLA, the Board has taken the decision that trading in the Company's shares be suspended with immediate effect.

Commenting, Christopher Fisher, Chairman of Southern Cross, said:

"We are now able to begin clarifying the arrangements for the future operation of our homes. The process of change on which we are now embarking involves considerable effort on the part of our management and staff and their commitment and loyalty is much appreciated.

"We anticipate that the period of uncertainty which we have been experiencing will now draw to a close. We regret the loss of value which shareholders have experienced."

Jamie Buchan, Chief Executive, said:

"My objective, and that of my team, is to continue to provide excellent care to every resident and to manage the programme of transition professionally. All 44,000 staff can take pride from the significant operational turnaround and improvements in care delivery which have been achieved over the past two years."

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