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Newly merged association retains credit rating

A newly merged housing association has retained its strong credit rating.

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PA Housing, the 24,000-home housing association created through the merger of Paragon and Asra housing associations, was given an A2 rating by Moody’s today.

It said the association “benefits from strong liquidity”, with a £91m cash balance as of February and £119m in undrawn, secured facilities.

Moody’s had previously signalled the new business would retain the same A2 rating as Paragon. The associations merged at the start of April.

The organisation plans to develop between 400 and 500 homes per year, which will result in “strong” liquidity cover, Moody’s said. Exposure to market sales will be “moderate”, at between 10% and 15%, with the majority for shared ownership.

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The landlord is expected to deliver an operating margin of 30% after cutting costs through the merger.

Moody’s said the new landlord will inherit Asra’s large swap portfolio with a notional value of £160m and a negative mark-to-market value of £58m.

“A robust and tailored treasury policy coupled with ample liquidity buffers mitigates the risk,” the Moody’s judgement said.

Two years ago Asra was censured by the regulator for struggling to meet a call for extra security on its derivatives.

The organisation has a negative outlook, in common with the rest of the sector, reflecting the UK’s vote to leave the EU.

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