ao link
Twitter
Facebook
Linked In
Twitter
Facebook
Linked In

You are viewing 1 of your 1 free articles

Two housing associations have credit ratings affirmed despite pandemic

Two housing associations in England have had their credit ratings affirmed despite the coronavirus crisis, albeit with ‘negative’ outlooks.

Linked InTwitterFacebookeCard
Picture: Getty
Picture: Getty
Sharelines

Two housing associations have credit ratings affirmed despite pandemic #ukhousing

COVID-19 to have no "immediate impact" for UK housing associations, says @FitchRatings #ukhousing

Origin Housing has retained its ‘A’ credit rating but its outlook has been revised downwards from stable to negative following an assessment by Fitch Ratings.

Great Places Housing Group has maintained the A+ rating with a negative outlook issued by Fitch last month, having since completed a merger with Equity Housing Group.

A negative outlook indicates the ratings agency believes that an organisation’s financial profiles could weaken over the next few years.

However, Fitch said it does not expect the COVID-19 pandemic to have an “immediate impact” on housing associations since the sector is being less affected than others in its portfolio.

Last month, the agency revised down to negative the outlooks of four housing associations, including Great Places, following its decision to downgrade the UK sovereign rating as a result of the economic impact of the pandemic.


READ MORE

Aggregator taps bond to raise £125m for two housing associationsAggregator taps bond to raise £125m for two housing associations
Associations’ coronavirus income hit to be offset by reduced operations, ratings agency saysAssociations’ coronavirus income hit to be offset by reduced operations, ratings agency says
Places for People handed credit rating upgrade over shift from market sale to social housingPlaces for People handed credit rating upgrade over shift from market sale to social housing

Fitch said it expects to see 7,000-home Origin’s net adjusted debt/earnings before interest, taxes, depreciation and amortisation (EBITDA) ratio changed in the next five years, which will weaken its financial profile.

Origin, which operates in London and Hertfordshire, has increased its development target to 1,090 units over five years. A quarter of the units have now been completed, with an expected tenure split of 48% for general needs, 5% for intermediate rent, 27% for shared ownership, 5% for open market and 15% through joint ventures.

The agency said: “Net adjusted debt/EBITDA was 14x at fiscal year end 2019, but Fitch expects this to rise significantly in its ratings case over the next five years. Due to this, the outlook has been revised to negative until Fitch reviews developments over the short term.”

The two associations were rated ‘strong’ across a number of categories, including revenue defensibility, operating risk and financial profile.

Fitch said: “Both [registered providers (RPs)] have maintained a strong performance, which we expect will improve, aided by continued but conservative development plans.

“Profits from the sale of private units will be reinvested to continue to build and provide affordable social units.”

On the sector as a whole, the agency added: “An increase in arrears may arise in the short term as a consequence of tenants losing their jobs.

“However, the overall impact is lessened for RPs because a significant proportion of rental income within social lettings is funded by benefit payments that will continue.”

Origin has retained its A credit rating. The change in outlook from stable to negative is against the background of a recently downgraded UK sovereign rating and revised outlook to negative; and reflects the short term prudent assumptions Origin is making in our revised 20/21 budget due to the impact of Covid-19, including a significant adverse impact on sales and assuming we continue to deliver our development pipeline of over 1,000 new homes over the next five years.

A spokesperson for Origin said: “Origin has retained its A credit rating. The change in outlook from stable to negative is against the background of a recently downgraded UK sovereign rating and revised outlook to negative; and reflects the short term prudent assumptions Origin is making in our revised 20/21 budget due to the impact of COVID-19, including a significant adverse impact on sales and assuming we continue to deliver our development pipeline of over 1,000 new homes over the next five years.”

Phil Elvy, executive director of finance at Great Places, said: “We also welcome the fact that Fitch has recognised the positive impact of our merger with Equity Housing Group at the beginning of April. This has created a new Great Places with greater financial and operational resilience.”

Sign up for our development and finance newsletter

Sign up for our development and finance newsletter
Linked InTwitterFacebookeCard
Add New Comment
You must be logged in to comment.