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London landlord in merger talks hit with credit downgrade
A London landlord that is currently in merger talks with Places for People has said it is “disappointed” after being hit with a credit downgrade.
Last week, Origin Housing, which has around 7,000 homes across London and Hertfordshire, was downgraded to ‘BBB+’ from ‘A-‘ by Fitch Ratings.
The major ratings agency said the downgrade is based on its view that “the sustained high inflation rate will further compress Origin’s margins over the coming years”.
It also pointed to the association’s “significant fire safety investments” and said Origin’s financial performance has “weakened”.
Fitch also maintained its ‘negative’ outlook for the landlord.
In its last full-year to the end of March 2023, Origin reported a group post-tax deficit of £1.6m on a turnover of £68.4m. However, this was a significant narrowing on the £21.3m deficit reported for the 2021-22 financial year.
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Origin’s merger talks with giant landlord Places for People were made public last month.
The announcement came three days after the English regulator revealed it was investigating Origin over possible non-compliance with its standards.
On Fitch’s action, Origin said in a statement: “While we are disappointed by the result, the current position reflects the growing pressure the sector has been facing due to higher operating costs driven by inflation, rising interest rates and building safety investment requirements combined with constraints on revenue income, such as the rent cap for 23-24.
“Nevertheless, we have the flexibility to adjust our plans, with a long history of successful adaptation to changing operating contexts, and a strong asset base.”
Fitch said Origin’s potential merger with Places for People was not taken into account with its rating. But the agency said if it goes head, it “could help Origin address some of its current challenges”.
Origin added: “The prospect of partnership with Places for People would secure additional investment in our existing stock portfolio and increased financial capacity to continue our successful track record of building new homes.”
If the merger is completed, Origin will become a subsidiary of 240,000-home Places for People.
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