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Moody’s changes outlook for Midlands housing association
Moody’s has changed the outlook of Bromford Housing Group from "stable" to "negative" but the association has kept its A1 rating.
Moody’s made the change based on Bromford’s plans to issue a £300m bond to support its growing development programme. The association plans to draw the bond in one tranche in 2018/19.
The credit ratings agency said the association’s financial metrics are "forecast to weaken", with debt-to-assets-at-cost projected to increase from 35% in the 2017/18 financial year to 41% in 2019/20.
Its market sales revenue is forecast to make up 23% of the association’s total turnover in 2019/20, up from 10% in 2017/18. The lower margins from sales are forecast to reduce Bromford’s headline operating margin to 26%.
The report said: “Following the bond issuance, Bromford’s rating will be constrained by its lower unencumbered asset position as the housing association plans to take on additional debt throughout the life of the currently proposed business plan.”
The ratings agency said Bromford’s continued A1 rating “reflects the entity’s strong focus on the provision of social rented housing, a traditionally stable and profitable business which supports strong social housing letting interest cover”.
Bromford has one of the highest operating margins in Moody’s portfolio, at 40% in 2017/18.
The report added: “The rating is further supported by the organisation’s strong practices and procedures, including its healthy liquidity policy, which has led to Bromford outperforming previous business plan forecasts.”
Imran Mubeen, Bromford’s head of treasury and planning, said: “We are delighted to have retained our A1 credit rating which is the highest in the sector and are pleased that Moody’s have made specific reference to the strong, sector-leading financial performance which we have delivered over a number of years.
“A change in our credit rating outlook has been envisaged for some time as we have undertaken a new and exciting strategy for increased investment in new homes against the backdrop of the UK’s growing housing crisis. We are also excited about the potential partnership with Merlin Housing Society and look forward to delivering 14,000 new homes and £1.5bn of investment in the Midlands and South West over the next decade.”
