The future of Britain's biggest private care home operator is hanging in the balance.
Four Seasons, which cares for 17,000 elderly and vulnerable residents in 343 care homes across the country, faces having to make an interest payment on Friday next week to bondholders.
It could be tipped into administration if it fails to do so.
Now the owner of Four Seasons, the private equity firm Terra Firma, has offered to hand over the business – which has debts of £525m – to the bondholders with immediate effect.
It said: "We believe this outcome will deliver much-needed certainty for patients and employees of the Four Seasons group."
But it is far from clear whether the bondholders, led by the hedge fund H/2 Capital Partners, will agree to this.
The two sides have been in dispute over the ownership of 24 additional care homes that are not part of Four Seasons and which are subject to a separate legal battle.
Terra Firma insisted that, as part of the deal, it would require assurances from H/2 Capital Partners and other bondholders that "they will protect" these 24 homes.
H/2, which has said it is ready to take over Four Seasons and which has lined up the Labour peer Baroness Ford to become chairman, is insisting it has the right to seize the additional homes.
If Four Seasons fails to make its bond repayment, the Care Quality Commission is likely to step in, potentially preventing Four Seasons from admitting any new residents to its homes.
The crisis at Four Seasons, which was bought by Terra Firma in 2012 for £825m and which employs 26,000 people, highlights the precarious state of Britain's care home industry.
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The sector already had a poor image among many investors following the collapse in 2011 of Southern Cross, which with 30,000 care home residents, was then the UK's largest operator in the field.
The entire sector has been hit by a number of factors, most notably, cuts to council funding.
As most care home residents are funded by their local authorities, this has put pressure on care home revenues, just at a time when most are facing cost increases due to demands for higher care quality and the introduction of the National Living Wage.
Moreover, many care home operators were already stretched financially, due to high levels of debts.
Around one in three care home operators are thought to be at risk of insolvency and around one in seven are 'zombie' companies that can only service their debt but stand no chance of ever repaying it.
And most care home residents are among those needing the costliest type of care.
As the row over care funding during the general election highlighted, earlier this year, patients with cancer are treated free of charge by the NHS.
Patients with dementia often have to pay for care and, with local authority funding under pressure, councils are being obliged to raise the entry qualifications for residential care.
All this comes at a time when the Care Quality Commission is demanding higher standards.
It has found that a third of Britain's care homes are in need of improvement.
Meanwhile, the ageing population means demand for residential care is rising, just as constraints on capacity start to bite.
Hundreds of care homes have closed during the last two years due to a combination of higher costs and increased funding pressures.
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Only last week, the Competition and Markets Authority published the findings of a year-long market study in which it identified a funding shortfall of £1bn a year across the UK, which it blamed on councils paying fees for the residents they fund that were below the costs incurred by care homes.
So, whatever happens at Four Seasons, this is unlikely to be the last crisis facing the care home sector.
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