Greenhill has been tasked with approaching potential investors, including American care home operators and private equity houses, to help the firm secure funding and establish a rescue plan.
The investment specialist will be working alongside KPMG and turnaround specialist Bolt Partners to explore various options for the beleaguered firm.
Southern Cross is now taking a two-pronged approach to turning the business around, to either restructure the company significantly and emerge on a more sustainable footing, or find an outright buyer.
A consequence in one of chief executive Jamie Buchan’s plans could see the company jettison around 200 homes.
The first priority for Southern Cross is to secure agreement with landlords to rein in rent costs that surpass £200m a year. The company has already asked landlords to reduce its rent bill by 30 per cent over the next four months so that a longer-term deal can be agreed.
The landlords have now agreed to form an official committee to begin talks, which will be chaired by Daniel Smith of Grant Thornton and have the vital support of Qatari-owned NHP, the biggest landlord.
While some landlords may take equity in a newly constituted Southern Cross in return for cutting rents, others would simply hand over the leases to a rival operator.
Some landlords, such as Four Seasons which are also operators of the homes, may take back leases and run the homes profitably themselves.
The second phase of Buchan’s plans involves a recapitalised Southern Cross emerging with a much smaller estate.
Southern Cross remains the biggest residential care operator in Britain with 750 homes and 31,000 patients. The group is struggling to meet annual rental payments at a time when the fees it receives from local authorities to look after patients are being reduced, due to councils undergoing spending cuts.
In March the company warned it may breach its banking covenants, triggering fears that it could fall into administration.