S&P downgrades biggest social landlord

Standard & Poor’s (S&P) said it has lowered its long-term credit rating on Wheatley Housing Group, Scotland’s biggest social landlord, because the narrow UK vote to leave the EU has caused “increasing political uncertainty and weakening institutional arrangements.”

Wheatley is the parent of the Glasgow Housing Association.

S&P downgraded Wheatley “and core group entity The Glasgow Housing Association Ltd.” to ‘A+’ from ‘AA’ and placed the landlord on “CreditWatch with negative implications.”

“The negative implications indicate the near-term possibility of a further downgrade if we anticipate an adverse impact on Wheatley from what we view as much weaker intergovernmental relations in the UK including potentially increased uncertainty regarding the revenue and expenditure balance, support for the local government sector, and policymaking in the UK,” said S&P.

“In our view, a weaker institutional framework would have implications for Wheatley’s operating environment.

“We could also revise downward our view of the likelihood of extraordinary support to Wheatley from the government.”

S&P said it also lowered to ‘A+’ from ‘AA’ its rating on the £300 million bond issued by Wheatley Group Capital and placed it on CreditWatch negative.

Wheatley operates across 17 local authority areas in central Scotland and its partners also include Dunedin Canmore, Cube Housing Association, Loretto Housing Association, West Lothian Housing Partnership, Barony Housing Association, YourPlace Property Management and Lowther Homes.

S&P lowered its long-term rating on the UK to ‘AA’ from ‘AAA’ on  June 27 after the UK voted narrowly to leave the EU.

“The lowering of our rating on Wheatley reflects our view of increasing political uncertainty and weakening institutional arrangements in the UK, of which Scotland is a part,” continued S&P.

“The ‘A+’ rating on Wheatley reflects our continued assessment of the entity’s stand-alone credit profile in the ‘bbb’ category; our view of an extremely high likelihood of Wheatley receiving extraordinary government support in the event of financial distress; and Wheatley’s relatively large size compared with housing association peers.

“In accordance with our criteria for government-related entities, we base our view of the likelihood of extraordinary government support on our assessment of Wheatley’s critical role in delivering social housing to Scotland.

“We expect to resolve the CreditWatch within the next three months.”

S&P concluded: “We could affirm the ratings if we were to conclude that weaker institutional capacity for predictable and stable policymaking in the UK would not have an impact on Wheatley.”