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Hyde’s property assets will counter ‘risks’ of taking on ‘weaker’ non-compliant landlord, S&P says
Hyde’s plans to take on a non-compliant landlord will not have an “immediate impact” on its creditworthiness due to its large asset base and “extremely strong” liquidity, according to S&P.
Last week, 45,000-home Hyde revealed it was in talks with London neighbour Tower Hamlets Community Housing (THCH) over a “business combination”.
It would see 3,200-home THCH, which is currently non-compliant for governance and financial viability with the English regulator, become a subsidiary of Hyde.
In a new report, S&P said that G15 landlord Hyde’s liquidity and 45,000-home portfolio would “largely mitigate risks” associated with the tie-up.
“In our view, Hyde should have flexibility to scale down or phase out investments in existing and new homes if needed, while its liquidity position provides strong buffers to absorb THCH’s weaker performance,” the agency said.
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“Furthermore, we expect that Hyde would address any of THCH’s weak governance practices, which the Regulator of Social Housing [RSH] also highlighted,” it added.
THCH was handed a G3/V3 rating by the RSH last year after it concluded the association was unable to meet the costs of its day-to-day operating activities and repair liabilities.
At the time, the regulator said THCH’s financial accounting practices had been “inadequate” and that this has led to “poor quality and incomplete financial data”.
S&P said it estimated that THCH’s financial profile is “substantially weaker” than Hyde’s, mainly due to large fire remediation works needed on its properties.
In its last reported year to the end of March 2023, THCH fell to a deficit of £9.4m on turnover of £26.5m.
Hyde’s bottom line also suffered in its last financial year. This week, the landlord reported that its group post-tax surplus fell sharply to £25.9m in the year to end of March 2024.
This compared with a surplus of £117.5m the year before when it benefited from £57.2m of net gains from swap movements.
In its latest year, Hyde also booked a £39.4m impairment due to contractor insolvencies, reappraisal of two developments and a change of use of one scheme.
The association retained £848m in liquidity, primarily through undrawn debt facilities. However, liquidity was slightly down on last year’s figure of £873m.
Hyde’s net debt was £1.47bn at the end of of its 2023-24 financial year.
The G15 landlord currently has grades of G1/V2 with the regulator.
THCH’s merger talks with another London landlord, Poplar Harca, fell through in April.
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