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THFC retains ‘A’ credit rating with stable outlook from S&P
Social housing bond aggregator The Housing Finance Corporation (THFC) has retained its ‘A’ rating with a stable outlook from ratings agency Standard & Poor’s (S&P).
S&P said THFC’s conservative risk management will help see it through the COVID-19 pandemic.
It expects the aggregator to face increasing competition but that its “robust record” as an issuer and lender will allow it to maintain a solid business position.
“The stable outlook indicates that THFC’s very conservative risk management practices and the relative resilience of the UK social housing sector will help it withstand the economic contraction that followed the COVID-19 pandemic, combined with Brexit,” the agency said.
S&P considers the impact of coronavirus on the UK social housing sector to be low risk because of the counter-cyclical nature of the industry and strong oversight from government via regulators.
It continued: “Increasing risks arising from Brexit and the aftermath of the pandemic could increase leverage at the housing associations and strain our public-sector industry risk and country risk assessment. That said, we don’t expect this will weigh on THFC’s overall enterprise risk profile.”
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As of March 2020, THFC had over 145 individual borrowers and a loan portfolio of roughly £7.5bn, with most of its funding coming from issuing debt in the sterling capital markets.
Loan growth continued in 2019/20, albeit slower than in previous years as business activity reflected the underwriting of loans under the Affordable Housing Finance Guarantee Scheme.
Net lending therefore decreased from £348m by March 2019 to £128.3m in March 2020.
But S&P noted that THFC remained a key source of funding for social housing, providing around 3% of the sector’s funding during the financial year.
Piers Williamson, chief executive of THFC, said: “By focusing on prudent risk management and robust financial health, we have been able to maintain our position as the sector’s leading aggregator and one of the largest providers of very long-term funding to housing associations across the UK.
“We have been particularly pleased with the growth in our Blend vehicle where our fleetness of foot has permitted us to bring a number of borrowers to market very rapidly, even in uncertain markets.
“Forecasts suggest we are in for a period of considerable market volatility in the next three or so months, but our credit strength demonstrates why investors continue to have confidence in our business, and this in turn helps us to consistently deliver low-cost, long-term funding for housing association borrowers.”
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