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Two major landlords’ credit ratings downgraded as tough operating conditions bite
Riverside and GreenSquareAccord have seen credit downgrades amid a wave of action by major rating agencies, as the challenging economic conditions continue to affect some landlords.
Liverpool-based Riverside, one of the UK’s biggest social landlords, was downgraded by Moody’s. GreenSquareAccord was downgraded by Fitch Ratings.
While some landlords saw negative action, Moody’s also affirmed the ratings for 33 housing associations and moved their outlook to stable.
Riverside’s downgrade to BAA1 from A3 reflected the 75,000-home association’s “weaker operating performance relative to peers”, Moody’s said.
The agency flagged Riverside’s “poorly performing care business and higher fire building and safety expenditures” inherited from taking on G15 landlord One Housing in 2021.
These problems are “exacerbated” by high inflation and increased demand for repair and maintenance, the agency said, which is prevalent across the sector.
In its last full-year to March 2023, Riverside reported a post-tax surplus of £869,000 on a turnover of £625.4m as its operating costs jumped.
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Despite the challenges, Riverside’s outlook was moved up to stable from negative by Moody’s due to its “adequate” debt metrics, “strong market position” and moves to scale back development and reduce market sales exposure.
Riverside also kept its stable outlook with Fitch last month, with the agency affirming its issuer default rating on the landlord at A.
A Riverside spokesperson said: “The group has invested millions in protecting our customers from fire safety costs at the same time the sector has had social rents capped and experienced higher inflationary costs, but in the longer-term we are financially stronger together.”
The spokesperson added: “Our treasury strategy also includes additional plans to restructure the combined debt portfolio and we expect that by delivering these changes, we will improve our credit rating.
At 26,000-home GreenSquareAccord (GSA), Fitch downgraded its long-term issuer default rating to A- from A, while its standalone credit profile was revised down to BBB+ from A-.
Fitch said the downgrade was due to “the deterioration in GSA’s financial position”.
The agency added: “Fitch views GSA’s performance as adequate, but deteriorating due to challenges in recent years, internal merger-related costs, and those expected in the near term, caused by external macroeconomic pressures.”
GSA’s outlook was kept at stable.
A GSA spokesperson said: “Our ratings reflect challenges many organisations in our sector our facing.
“Our existing strategy is focused on continuing to improve GSA’s financial position in the context of the operating environment and is already well progressed.
“We expect in due course these actions will be reflected in our credit ratings.”
Moody’s kept its negative outlook for GSA and maintained a long-term issuer rating of A3.
G15 landlord Metropolitan Thames Valley Housing (MTVH) saw its outlook moved to negative by Fitch, while its credit rating was affirmed at A.
Fitch pointed to “worsening financial leverage metrics” for the 57,000-home landlord, which “significantly limits rating headroom”.
An MTVH spokesperson said “We are pleased to retain an A rating from Fitch Ratings despite operating in a challenging economic environment.”
Futures Housing Group (FHG) had its outlook moved to negative by S&P due to the risk that “higher than anticipated investments” in existing homes “coupled with inflationary pressures” could hamper the improvement S&P expects in the association’s financial metrics.
However, the 10,300-home landlord kept its A+ credit rating.
Ian Skipp, finance and resources director at FHG, said the association is “proud to be able to reassure the financial markets that we are riding out what many see as a perfect storm facing our industry”.
L&Q, Stonewater, Moat, Jigsaw and Hightown saw their negative outlooks maintained by Moody’s due to “decreased resilience and high exposure to a challenging operating environment”.
All these housing associations had their current credit ratings affirmed.
In particular, Moody’s noted L&Q’s “high exposure to market sales”.
L&Q declined to comment.
Anne Costain, chief financial officer at Stonewater, said the landlord “remains financially strong” with a “relatively young stock profile” and a regulatory rating of G1/V1.
Gloria Yang, finance director at Moat, said: “We are content to have the A2 negative rating affirmed, ahead of annual review meeting in a few weeks’ time.”
Jigsaw said Moody’s opinion reflects on the association’s decision to “utilise its significant covenant headroom at a time when the economic outlook remains very uncertain”.
A Hightown spokesperson said: “We are pleased to have had our Moody’s A3 rating recently confirmed. We understand why our current social housing development programme means that we have remained on negative watch but we aim to move to a stable outlook.”
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