S&P removes Housing 21 from CreditWatch and affirms rating after merger plans abandoned

On 10 August, the groups announced that they had decided not to merge, after a period of due diligence.

On 15 August, as a result of this announcement, S&P said it had removed Housing 21’s ratings from its CreditWatch list.

The agency affirmed its A- long-term issuer credit rating on Housing 21, as well as the A- long-term issue rating on the provider’s £500m senior secured bond, and said the outlook was stable.

S&P said Housing 21 has continued to benefit from “strong demand” for its retirement living and extra-care properties across England.

It said the stable outlook reflected its view that the landlord’s increasing rental revenue, supported by strong demand, would offset the risks associated with higher cost pressures and further expansion of its asset base.

“The rating affirmation reflects our view that the group will continue to see strong and increasing demand for its services in retirement housing and extra care, which will drive stable and predictable rental revenue and support financial performance,” S&P said in its report.

It added: “In our view, significant cost pressures due to inflation and investment in existing stock will be somewhat mitigated by rental increases and new units, which will drive revenue growth.

“We expect that this will lead to continued strengthening of S&P Global Ratings-adjusted non-sales EBITDA over the coming two to three years. That said, we think the increasing capital expenditure (capex) associated with H21’s development ambitions will moderately raise its debt intake, pressuring its debt metrics and liquidity.”

In its last reported full year to March 2022, Housing 21 posted a group deficit of £8.9m as it recorded £20.8m in finance costs. Turnover increased by 11.5 per cent, to £224.4m.