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Credit outlook revised at major landlord due to favourable debt costs and solid interest cover
Bromford has seen its outlook revised to stable from negative after a major credit ratings agency found that it will maintain strong financial metrics despite the challenges facing the sector.
Standard & Poor’s (S&P) confirmed the revised outlook this week, and affirmed the West Midlands-based landlord’s ‘A+’ long-term issuer credit rating, and on its senior secured bonds.
The ratings agency said the stable outlook reflects its view that Bromford’s management will prudently execute its business plan and manage costs, while keeping enough financial headroom to mitigate current operating challenges.
Bromford owns and manages more than 46,000 homes across the West Midlands and the South West of England.
S&P explained that the outlook revision is underpinned by robust business planning and cost management, alongside a limited exposure to open market sales, which is underpinned by solid operational metrics.
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It added: “The outlook revision reflects our view of Bromford’s strengthened intrinsic credit quality. We think that management’s sound ability to deliver cost efficiencies will help balance pressure from inflation, high investment needs in existing assets, and tighter funding conditions.
“This should support the strengthening of the group’s EBITDA, in turn improving the group’s financial headroom.”
S&P also reassessed the landlord’s strategic planning and management. It found that the actions of Bromford’s management have supported solid credit indicators, notably amid sector challenges.
S&P said: “Bromford’s development strategy remains well aligned to its capabilities. In our view, the projected improvement in non-sales EBITDA and the group’s favorable weighted-average cost of debt will also largely offset the anticipated increase in nominal debt from Bromford’s development program.”
It added: “Given Bromford’s prior successful placements in the capital markets, we consider that the group has satisfactory access to external funding when needed.”
S&P expects Bromford to deliver around 3,700 homes between March 2024, to the end of financial year 2026.
Imran Mubeen, director of treasury at Bromford, said: “As the rent cap continues to meet with stubborn levels of inflation, and as interest rates continue to rise, we continue to place treasury analysis at the beating heart of business planning and corporate strategy.
“It means we own our credit ratings rather than being held hostage to them, with every pound of funding and new investment purposefully curated in our plan to arrive within safe harbour lines to maintain our A+ and A2 ratings.
“With all of the headwinds we are facing, it is becoming more difficult but with purposeful planning it is still within reach. When we get this right, rather than restricting future investment, credit ratings help to identify new opportunities to unlock balance sheet capacity.
“We are pleased that S&P have recognised the strength of our business plan, the quality of our homes and the operational efficiencies we have driven without compromising service delivery or customer experience.”
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