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UK taxpayers take on indebted nursing home chain

British taxpayers will soon take indirect charge of Four Seasons Healthcare which is one of the U.K.'s largest nursing home chains. The company has run into serious financial difficulties and its main lender, the Royal Bank of Scotland, has effectively been forced to take a debt for equity swap and reduce the company's £1.55 billion debt mountain by 50%. In exchange Royal Bank of Scotland will own 40% of the equity in the company, which will indirectly give UK taxpayers yet more exposure to another bailout.

Despite a number of questions being raised over the last few months, Royal Bank of Scotland has not been able to confirm how many customers have fallen into serious financial difficulties and been offered a debt for equity swap. However, there is no doubt that more and more banks will be forced down this avenue in the short to medium term because while many companies may be in debt, there are still some quality underlying businesses below the surface.

The problem which UK banks will then have is finding an exit route in the medium term in a manner which will at least give them back their investment and possibly more. Will we see UK banks dumping share stakes as soon as the economy shows any signs of life?

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