Specialist provider with ‘unique’ operating model retains AA- credit rating

Local Space, which manages 3,000 homes, has had its long-term AA- issuer rating affirmed by S&P. 

The provider which operates across several east London boroughs, also had the outlook on its long-term issue rating changed from ‘negative’ to ‘stable.

S&P said: “The rating on Local Space reflects our positive view of the group’s management as strong.

“This assessment is underpinned by recent enhancements to treasury policy and liquidity management, improving capacity and stability. We believe management is working to enhance control over assets through direct tenancy management and surveying stock.”

Local Space has deals with the London boroughs of Newham, Hackney, Waltham Forest, and Tower Hamlets, which have a high demand for temporary and keyworker housing.

The rating agency said: “We think the group’s operating model is unique among the social housing providers we rate because the group continues to derive predictable revenue streams from a large portion of its portfolio through its rent-guarantee agreements with local authorities.

S&P said the move to stable oulook “reflects management’s actions to bolster liquidity and support cash management through arranged refinancing and a limited acquisition programme.

>>See also: Housing associations’ interest cover falls to lowest level since the recession, warns RSH

>>See also: Many housing associations’ earnings aren’t enough to cover costs – it’s grave news for housing delivery

It said: “We project Local Space will maintain favorable margins amid cost increases and curtail weakening beyond expectations.”

S&P said it projects Local Space’s interest cover – which measures debt to assets and is often used as a measure of capacity – will weaken due to a higher cost of capital and lower EBITDA. It said: however it expects management to mitigate this risk by adopting a greater proportion of fixed-rate debt.