Moody's downgrades housing associations' credit ratings
Published by Max Salsbury for 24dash.com in Housing and also in Central Government, Finance
The credit ratings of 26 English housing associations have been downgraded by Moody's.
The ratings agency's decision to cut the HAs' ratings by one notch was driven by a reassessment of the potential provision of extraordinary support from the regulator, and ultimately the Government, should any HA experience acute liquidity stress.
The downgrade came a day after Moody's cut the UK government's debt by one notch from AAA to AA1.
Moody's says that the decision to cut the HAs' ratings reflects a weaker regulatory framework.
All ratings in the sector have been placed on review for further downgrade as Moody's continues to refine its view on the likelihood of extraordinary support.
Moody's decision to maintain the Baa2 rating of Assettrust Housing Association was driven by the HA's reduced dependence on government support. However, Moody's has placed Assettrust's rating on review for downgrade, in line with the rest of the sector.
Moody's decision to maintain the A1 issuer rating of Genesis Housing Association reflects the rating agency's assessment that the HA's standalone credit has strengthened, due to its improving cash flows, with plans to eliminate its historical reliance on sales to cover interest costs; a reduced risk from hedging; improved liquidity; and stronger controls and budget planning.
In addition, Moody's has placed Genesis' rating on review for downgrade, in line with the rest of the sector.
An improvement in the Government's credit profile, as reflected by an upgrade of the sovereign, would exert upward rating pressure on the ratings of HAs.
Conversely, a further weakening of the Government's credit profile, as reflected by a further downgrade of the sovereign rating, would likely translate into a downgrade of HAs.
Additionally, a downward revision of Moody's assessment of the likelihood of timely government support being provided to an HA experiencing acute liquidity stress, would also exert downward pressure on the ratings.
During the review period, Moody's will assess the likelihood of extraordinary support that might be available for English HAs in case of need.
If Moody's concludes that there are support inefficiencies, the rating agency would likely further lower its assessment of liquidity support for the sector and hence limit the uplift currently provided by such support; this could potentially prompt Moody's to downgrade some entities by multiple notches.