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S&P raises MORhomes’ outlook as borrowers to maintain ‘solid credit quality’
MORhomes has had its credit rating outlook raised to ‘stable’ from ‘negative’ by Standard & Poor’s (S&P) partly as the agency expects its borrowers’ creditworthiness will be maintained despite the impact of Brexit and the pandemic.
In an update yesterday, S&P said it was revising its outlook on the bond aggregator also due to its view that it will maintain its market share despite “high competition”.
MORhomes was revised down to a negative outlook by S&P two years ago as the agency pointed to “slower than expected” initial expansion.
In the latest update, S&P said: “The stable outlook indicates that we expect MORhomes to continue strengthening its business operations.”
The agency said it expects MORhomes will provide around 3% of new annual lending in the sector for the next two years despite operating in an “increasingly competitive environment”.
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Last year the firm was among a number of aggregators to miss out as the government selected investment manager ARA Venn to run its Affordable Homes Guarantee Scheme.
MORhomes currently has 66 housing associations as shareholders that are able to get access to funding. The aggregator has a total loan book of £492m, with 20 loans across 19 housing associations, according to S&P.
On the position of its borrowers, the agency said it expected them to “maintain solid credit quality”.
The update said: “In our view, risk management policies provide certainty that the company will mitigate a potential deterioration on its asset quality as housing associations in the UK navigate risks related to the aftermath of Brexit and the pandemic-related contraction.”
It added: “This is mainly because of the relative resilience of the housing sector in the UK, the credit risk management that prevents lending to less creditworthy housing associations, and the different layers of protection in MORhomes such as equity, subordinated debt and access to standby liquidity facilities.”
Earlier this year the aggregator launched a sustainable bond framework, with the first fundraising through it completed last month.
S&P also affirmed its A- long-term issuer credit rating and A2 short-term rating on MORhomes.
Neil Hadden, chair of MORhomes, said: “As a company owned by housing associations, we are particularly pleased at S&P’s recognition of our strong risk management, focus on ESG [environmental, social and governance] principles and the launch of our sustainability bond.”
Last week S&P warned that housing associations’ debt piles will continue to grow despite more focus on government-backed affordable housing development.
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