Lease-based provider downgraded to G4 after ‘serious failure’

News01 Oct 2019Sarah Williams

A lease-based provider previously found non-compliant by the Regulator of Social Housing (RSH) has been downgraded further to the lowest governance rating, G4.

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Lease-based provider Westmoreland downgraded to G4 after “serious failure” #ukhousing #socialhousingfinance #governance

The 30 September judgement described “serious failure” relating to Westmoreland Supported Housing temporarily entering into the regulator’s insolvency process.

Just three other providers have received a G4 rating in judgements in the past.

The latest regulatory update for Westmoreland comes just weeks after the RSH announced that it had intervened to make three statutory appointments to its board.

Westmoreland, which works with care providers to deliver accommodation for adults with complex learning and physical disabilities, has not received a further downgrade to its viability rating. It maintains the non-compliant V3 rating given to it in its previous November 2018 judgement.

The regulator said that this was in view of the “continued support and forbearance the organisation is receiving from its creditors”, but added that it would continue to closely monitor this position as restructuring plans are developed and implemented.

The regulator explained: “In July 2019, creditor action taken against Westmoreland (who dispute the debt) led to the provider entering into the regulator’s insolvency process and the commencement of a moratorium. A combination of subsequent creditor forbearance, and actions taken by the provider and by the regulator, meant that creditor action was withdrawn.

“However, this is a serious failure. As a result the regulator has taken steps to increase capacity and skills on Westmoreland’s governing body while it works through the challenging circumstances it faces by appointing three new officers to the board under its statutory powers.”

It added: “The immediate actions taken by the parties involved led to the insolvency processes that had been triggered being halted. This has given Westmoreland time to work on restructuring its business plan.”

The regulator said that the enforcement action is intended to strengthen Westmoreland’s governing body and to ensure that the existing board members have the support needed to address weaknesses in its governance and financial management.

It said: “The Westmoreland board has committed to work with the regulator and the regulator will continue to engage intensively with Westmoreland while solutions and recovery plans are developed and implemented.”

In a statement, Mike Doran, chair of Westmoreland, said: “We have been in discussion with the regulator regarding the recent judgement and accept the position they have taken. Over the past five months we have worked hard to improve governance through the appointment of a new CEO, as well as the appointment of new independent, skilled and experienced board members while previous members have stepped down.

“We welcome the added capacity the three appointments to the board provide and look forward to continuing to deliver an improvement plan for Westmoreland in partnership with the regulator.

“We are also working closely with creditors and landlords to restructure our finances and deliver a new business plan to ensure Westmoreland’s long-term sustainability.”

Two publicly listed real estate investment trusts (REITs) that own a number of properties leased to Westmoreland issued statements in response to the judgement.

Triple Point Social Housing REIT, which said it had 15 leases with Westmoreland on properties representing 4.7 per cent of the company’s net assets, as at 30 June 2019, referred the creditor action in a statement, saying: “The company [Triple Point] understands that this was an isolated creditor action as a result of a commercial dispute relating to specific properties (none of which are owned by the company). The creditor action has since been withdrawn.

“All payments under the company’s leases with Westmoreland continue to be paid on time.”

Civitas Social Housing REIT, for which rental income attributable to Westmoreland contributed 11.2 per cent of its portfolio at 30 September 2019, said: “Westmoreland is making continued improvements to governance and operations and its provider of third-party funding has confirmed to Civitas that it remains firmly committed to Westmoreland.”

Civitas added that, given the improvements being made, it expects Westmoreland’s rating to change in future.

According to the RSH’s latest regulatory judgement, Westmoreland operates in 112 local authority areas nationally – an increase on the 107 recorded at the time of the November 2018 judgement.