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BPHA has credit outlook downgraded
Housing association BPHA has seen the outlook on its credit rating adjusted downwards by ratings agency Standard & Poor’s (S&P).
After an annual review, the 18,000-home association saw its outlook change from stable to negative, with the underlying rating remaining at A+.
In its judgement, S&P predicted that BPHA would increase its exposure to market-related activities in the next three years, but that these would not exceed one-third of revenues.
It added: “We view these activities, such as shared ownership sales and outright sales, as higher risk than traditional social housing activities, leading to less predictable revenues.
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“The increasing proportion of non-traditional revenues, in combination with a government-imposed rent cut until 2020, is leading to weaker interest and debt coverage for the social housing activities, although we think coverage could improve again in 2020 when the rent cut disappears.”
S&P noted, however, that BPHA still “benefits from strong economic fundamental and excellent asset quality”.
Many of the association’s properties are in the Oxford-Cambridge corridor, close to London, an area of above-average population growth. S&P said that this ensured continuing demand for BPHA’s properties.
BPHA plans to build 3,000 new homes between 2018 and 2022. S&P said that these will mostly be for affordable rent and shared ownership, with a small number of outright sales.
Paul Gray, chief financial officer at BPHA, said: “We are pleased to have maintained the A+ rating and welcome S&P’s recognition of our strong margins, liquidity, and excellent asset quality.”
S&P’s decision marks a change in attitude since November last year, when it confirmed that BPHA’s A+ credit rating still had a stable outlook.
At the time, it said that efficiency gains and demand in BPHA’s active areas had contributed to a strong performance for the association in 2017.
The change in BPHA’s outlook is not as significant as the recent downgrades seen by large London housing associations in S&P’s portfolio.
In July, the agency downgraded five such social landlords over their increased exposure to sales risk. At A+, BPHA is still rated more highly than all of these associations – L&Q, Notting Hill Genesis, Guinness Partnership, Hyde and Metropolitan.
