S&P upgrades THFC’s credit rating

S&P said the stable outlook reflected its expectation that THFC’s position and low-risk operating environment would “offset pressure coming from strong competition, such as banks and own-name placements by social housing providers”.

The affordable housing aggregator said this “sends a positive message to the wider UK social housing sector”. It currently has a loan book of £7.95bn to 160 housing associations, down slightly from £8.1bn in 2023.

S&P said: “We believe this decline is temporary and THFC will resume its lending in the medium term. The company has the longest track record compared with other peers and has historically enjoyed strong portfolio growth.”

It also praised the firm’s “strong” funding and liquidity position, “even under severe liquidity stress scenarios”, and its governance framework.

Priya Nair, chief executive at THFC, said: “This rating upgrade is strong evidence that despite the challenges housing associations face, the sector continues to be seen as financially robust.

“Having recently achieved the strongest set of financial results in THFC’s 37-year history, it’s encouraging to receive external validation for our strength and stability.”

THFC’s annual results to 31 March 2024 showed a pre-tax surplus of £8m – its highest yet.

The upgrade follows a decision by S&P to review its approach to organisations it categorises as public-sector funding agencies, meaning it is more closely linking its analysis of these bodies to the credit risks of the underlying sector.

As a result, S&P placed its ratings for THFC “under criteria observation” in July, but has now removed them from this position.

S&P said it could lower the rating if THFC’s risk-management policies became less prudent or if the company’s loan book substantially decreased.

It could raise the rating “if THFC significantly strengthened its market position while maintaining strong risk management standards and asset quality”.

Moody’s has also maintained a stable long-term A2 credit rating for Blend Funding, THFC’s wholly owned subsidiary.

The agency said Blend’s credit quality was down to “strong management of its pool of 32 housing association borrowers” and the housing providers’ own high credit quality.

Ms Nair added: “The new government has offered some positive policy changes for social housing, and we at THFC and Blend stand ready to provide the support and type of debt funding the sector needs to build and improve homes and help create sustainable communities across the UK.”

THFC recently secured a £30m deal for the Swaythling Housing Society, a subsidiary of Abri Group