Onward Homes has received an A1 debt rating for its £ 350million bond project from rating agency Moody’s.
The social landlord of 35,000 homes is planning a bond loan of £ 350m which will be used to refinance existing bank loans in order to simplify the group’s debt structure and finance its development program.
Moody’s said the bond is expected to be long-term with an end-to-end maturity, meaning that a lump sum will be paid for the entire loan outstanding at the maturity date. Between £ 100m and £ 150m of the bond will be held and these funds will be available for withdrawal within five years of the initial issuance.
Moody’s said the A1 rating is derived from the group’s A1 long-term issuer rating – also A1 – which was published last month.
The agency said: “The issuer’s rating reflects Onward Group’s very strong balance sheet with low debt, high interest coverage ratios, high liquidity, a conservative strategy focused on low risk social housing. , moderate capital expenditure and effective governance and management.
“The issuer’s rating also incorporates the lower profitability of the group and our assessment that there is a high probability that the UK government (Aa3 stable) will step in should Onward face a serious liquidity problem.”
Moody’s said any downgrade to Onward’s long-term issuer rating could lead to a lower debt rating, while improving operating margins maintained above 30%, improving About 3.0 times liquidity and interest coverage ratios could result in an upgrade.
The agency added: “A strategic shift and increased risk appetite resulting in significantly higher debt, capital expenditure and market sales than expected would put negative pressure on the rating. A significant erosion of interest coverage ratios would also exert negative pressure. A dilution of the regulatory framework or support for the sector, or a downgrade in the UK’s rating would also exert negative pressure on the rating.
Inside the accommodation contacted Onward for a response.
Moody’s rating scale
Aaa – bonds rated Aaa are considered to be of the highest quality, with minimal risk
Aa – Obligations rated Aa are considered to be of high quality and are subject to very low credit risk
A – Obligations rated A are considered to be of upper average quality and are subject to low credit risk
Baa – Obligations rated Baa are subject to moderate credit risk. They are considered to be of medium quality and as such may possess speculative characteristics
Ba – bonds rated Ba are considered to have speculative elements and are subject to substantial credit risk
B – bonds rated B are considered speculative and are subject to high credit risk
Caa – bonds rated Caa are considered to be of poor quality and are subject to very high credit risk
Ca – bonds rated Ca are highly speculative and are likely to default or very close to default, with some prospect of recovery in principle and in interest
C – bonds rated C are the lowest rated bond category and are generally in default, with little prospect of principal interest recovery