Fears are rising that Four Seasons, Britain's second biggest care homes operator, is heading for administration as hopes of a rescue deal for the debt-stricken group fade.
The company, owned by Guy Hands' private equity vehicle Terra Firma, is struggling under £525 million of debt and faces a critical interest payment on December 15.
However, Four Seasons is now likely to miss the payment, plunging into doubt the future of 17,000 elderly residents across 343 homes.
It comes amid a failure by Terra Firma and Four Seasons' principal creditor, American hedge fund H/2 Capital Partners, to thrash out a deal that would avert disaster.
Terra Firma is urging H/2, run by Spencer Haber, to take full control of the group before it goes into administration as part of a debt restructuring.
But H/2 has rejected the proposal as the pair disagree over the terms of the restructure and over the ownership of 24 homes, which are subject to a court battle.
Should Four Seasons collapse into administration, it would be the biggest care homes failure since Southern Cross in 2011.
A spokesman for Terra Firma said: "There is no reason to put Four Seasons into administration.
"We call on H/2 Capital Partners, who have acquired their debt at a discount since 2015, to stand by its commitment to find a consensual outcome for the benefit of employees and residents and head off the risk of the obvious disruption that administration would trigger."
The Press Association revealed earlier this week that H/2 could be in line to pocket up to £500 million from the collapse of Four Seasons.
It is understood that H/2 bought its debt holding in Four Seasons for approximately £256 million, while the enterprise value of the care operator is thought to stand in the region of £700 million.
H/2 has already received debt interest payments of £50 million, meaning that, were the hedge fund to sell the group or its debt on, as some industry experts expect, it could profit to the tune of £494 million.
Terra Firma has also accused H/2 of being "unwilling to engage", blocking email addresses and refusing face-to-face meetings.
H/2 has said it stands ready to take control of the care homes group, with Margaret Ford, former chairwoman of rival Barchester, at the helm.
Terra Firma bought Four Seasons for £825 million in 2012 and stomached a £450 million writedown on its investment two years ago.
Four Seasons has seen its financial performance deteriorate in recent years.
It has been stung by a cut in local authority fees, rising costs and the introduction of the national living wage, and the group has continuously warned over its long-term stability.