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Troubled London landlord could get credit rating upgrade if merger completes

S&P could raise Octavia’s credit rating if it completes a merger with larger landlord Abri, the rating agency has said.

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S&P could raise Octavia’s credit rating if it completes a merger with larger landlord Abri, the rating agency has said #UKhousing

London-based Octavia, which is currently non-compliant with the regulator’s standards, has had its BBB rating from S&P placed on ‘CreditWatch with positive implications’. 

“Abri has historically reported stronger financials compared with Octavia, and so we expect the combined entity would have stronger creditworthiness than Octavia’s,” S&P said in a new report.

It added: “This is partly because Octavia, which is financially weak in our view, would account for a comparatively small share of the combined group.”


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The two landlords announced last week that they were in talks over a possible merger. Octavia is by far the smaller of the two groups, with around 5,000 homes compared with Abri’s 50,000, but details on how the tie-up will work were not disclosed.

Octavia was downgraded to non-compliant ratings of G3/V3 by the Regulator of Social Housing (RSH) in September after “producing poor-quality and untimely financial data, and setting unrealistic budgets”. The RSH also branded Octavia’s financial position “weak”.

A few days after the RSH’s verdict, S&P lowered its credit rating on Octavia to BBB, as it warned “subdued financials could narrow the group’s headroom to meet lenders’ covenants”. However, the agency said it believed Octavia currently had “sufficient” liquidity.

S&P said in its latest update: “We expect that synergies and economies of scale from the combined group’s large asset base could help balance cost pressures.”

It added: “We think the business combination could improve Octavia’s management and governance, in addition to changes and measures taken at Octavia’s level already.”

Sandra Skeete, Octavia’s outgoing chief executive, said the group was pleased at the latest “positive response” from S&P.

“While discussions are at an early stage, both parties are working hard to deliver the partnership,” she added. 

Last week, it was announced that Ms Skeete will be stepping down in January. Kevin Bolt, the former chief executive of BPHA, will take over as managing director to oversee day-to-day operations.

Octavia has experienced a swathe of changes in its executive team since last year. Chief financial officer Lynsey Bradshaw resigned in September 2022. Since then, two people held the job on an interim basis before Adam Barrett, the former finance director of Sutton Housing Partnership, took up the reins in June.

Alison Muir, a former St Mungo’s executive, was appointed Octavia’s chief operating officer in September.

In its last full year to March 2023, Octavia reported a £3m surplus on turnover of £57.2m.

Abri, which operates homes across the South of England, reported a post-tax surplus of £39.5m on turnover of £263.9m in the year to the end of March 2023.

Last month, Abri completed a merger with 7,500-home Silva Homes. The smaller landlord will initially operate as a separate legal entity as part of the Abri group, before transferring over next year.

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