S&P affirms THFC’s ‘A’ credit rating and market position as ‘leading aggregator’

2021-09-21

Standard & Poor’s (S&P) has affirmed The Housing Finance Corporation’s (THFC’s) long-term issuer rating as ‘A’ with a stable outlook, describing it as a “leading aggregator” that has continued to provide UK housing associations with strong access to low-cost funding throughout the global pandemic.

Publishing its research note yesterday (15 September), S&P described THFC as a frequent and well-established issuer which “enjoyed strong access to the markets throughout the pandemic and arranged funding at a low cost which help sustain its market position”.

It also cited “above-average” expertise in its management team, innovative approaches – including in the areas of environmental, social and governance (ESG) – robust governance and a strong reputation in the sector.

It said that conservative risk management policies, and regulatory stewardship based on its ownership structure, have put THFC in a better position to perform its role and fulfil its policy mandate than its domestic peers.

S&P affirmed both the ‘A’ long-term and ‘A-1’ short-term issuer credit ratings, and said a stable outlook shows an expectation that THFC will remain a leading aggregator.

The ratings agency added that THFC has been the most frequent issuer in the market, mainly through its subsidiary, bLEND. It pointed out that THFC has issued £605m through eight separate bond transactions and achieved a competitive average fixed rate pricing of 2.2%.

Piers Williamson, CEO of THFC, said: “The phrase ‘strong and stable has been somewhat maligned recently, but that’s been our approach to THFC in the 16 years we’ve had an S&P rating. And to state the obvious, we wouldn’t have been able to write the substantial amount of business we have done without being flexible and able to deliver great pricing to a very great range of HA customers.”

THFC was set up in 1987 in partnership with the National Housing Federation and what was the Housing Corporation, to facilitate and promote private investment in the UK social housing sector. As at March 31, 2021, it had a loan book of £7.9 billion, providing funding to 161 borrowers.

Last month, THFC reported one of its strongest years for funding transactions in its 34-year history.

S&P said it believes THFC’s “name recognition” will enable it to sustain a robust business pipeline, in spite of increased competition in the market.

It said THFC’s management has “above-average levels of expertise and experience”, and has been enhancing internal processes and introducing innovative products to adapt to the market needs. One example was THFC’s leading role in developing the social housing sector’s Sustainability Reporting Standard and subsequently became an early adopter of this framework.

THFC also enjoys a robust governance framework, as unlike other UK-based funding agencies, the group has board nominees from the English Regulator of Social Housing and the National Housing Federation, the English housing sector’s trade body.

S&P added that strong business generation in the last financial year has resulted in accumulated reserves growing to £46.5m, outpacing the increase in risk-weighted assets.

Furthermore, THFC’s funding and liquidity position were described as strong, supported by a robust capacity to cover its liabilities, even under severe liquidity stress scenarios.

S&P also confirmed the A rating across THFC’s funding subsidiaries: THFC (Funding No. 1) PLC, THFC (Funding No. 2) PLC, and THFC (Funding No. 3) PLC.

Posting financial results for the 12 months to 31 March 2021, THFC last month revealed a pre-tax surplus of £7.2m, up from £3.4m in 2020. As a not-for-profit organisation, this surplus is reinvested in the group’s core activities of sourcing funding from a range of institutional investors to deliver cost-efficient, responsible funding for housing providers.

S&P affirms THFC’s ‘A’ credit rating and market position as ‘leading aggregator’

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