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London housing association to borrow £300m on bond market
Southern Housing Group is preparing to borrow £300m on the bond market, according to a release from credit ratings agency Moody’s.
The agency rated the issue as A2, putting it towards the top of Moody’s portfolio of housing associations.
Inside Housing understands that Southern will put on roadshows for investors next week.
The association, Moody’s said, plans to retain £100m of the issuance, which can be drawn down within five years of the initial issue. This means it will only have immediate access to £200m of borrowing.
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Moody’s added that the bond is expected to be secured by a portfolio of social housing properties owned by Southern.
The agency said: “The issuer rating reflects Southern’s strong balance sheet, liquidity and financial management policies, in addition to the strong regulatory framework governing English housing associations.
“The issuer rating also incorporates the group’s forecasted accelerated debt growth and consequent weakening of interest cover ratios, and our assessment that there is a strong likelihood that the UK government (Aa2 stable) would intervene in the event that Southern faced acute liquidity stress.”
The outlook on the bond is negative, reflecting Moody’s recent change to Southern’s outlook as an organisation from stable to negative.
At the time, the agency said that this was a result of Southern’s “strategic shift toward more ambitious growth”.
In its past financial year, Southern posted a 27% drop in surplus as operating costs rose, while turnover was broadly flat. The group is also getting a new leader with Tom Dacey, chief executive of Southern, retiring to be replaced by Alan Townshend, current group development director.
In an interview with Inside Housing in June, Mr Townshend said that supply chain issues had hit development this year, which was why Southern had fallen out of Inside Housing’s list of the Top 50 Biggest Builders.
The association borrowed £75m in a revolving credit facility from Japanese bank Mitsubishi UFJ Financial Group in May.
