Churchlake Holdings Ltd

A large group of care homes has been placed in administration after a few of its members encountered financial difficulties and the remaining companies were unable to meet their guarantee obligations.

Churchlake Holdings Ltd (“Topco“), the holding company of the Churchlake Group, along with a further 11 entities within the Group, were placed in administration in November by secured creditor TC Loans Limited. Philip Dakin and Benjamin Wiles of Kroll were appointed as Joint Administrators.

In July 2022, TC Loans advanced two term loans to the Group totalling approximately £16.2 million. Shortly after the loans were made, the company advised TC Loans Care that the individual care homes had good occupancy rates, were overall profitable with an EBITDA of approximately £3 million, cash at bank of approximately £400,000, and Care Quality Commission (“CQC“) reports which were largely rated as “good”.

However, in October 2022, TC Loans became increasingly concerned by, amongst other things:insolvency events in 3 companies within the wider Group and the likely downgrading of CQC ratings on at least 2 of the homes which provided the primary security/collateral for TC Loans; andthe company’s exposure to two guarantees worth approximately £250,000 and £2 million respectively.

As a result, TC Loans took steps to appoint the Joint Administrators over Topco on 8 November. After an initial meeting with Topco’s directors, where it was intimated that not all of the directors would be willing to cooperate with the Joint Administrators’ proposed “light-touch” strategy of Topco, TC Loans took steps to appoint Joint Administrators over the other members of the Group.

The Joint Administrators are now trading the homes to stabilise operations and initiate a marketing process. In their view, it may be possible to rescue the Group as a going concern through a share sale, but this is uncertain at this time. Alternatively, the Joint Administrators believe it will be possible to achieve the second objective via a sale of the Group’s business and assets as a going concern.

The Joint Administrators have approached a number of sales agents who specialise in the sale of care homes to seek proposals.

Based on current estimates, it is anticipated that TC Loans will be paid in full, while it does not appear that there will be sufficient realisations to enable a distribution to preferential and unsecured creditors of the company. The Joint Administrators have not released any further information with respect to any value that may be generated in order not to prejudice any future sale.

The Joint Administrators’ proposals can be found HERE.

The Joint Administrators have been assisted by Irwin Mitchell.