Fresh blow for Shaftesbury as credit rating is weakened

Beleaguered Shaftesbury Housing Group has had a question mark placed over its credit rating.

The association’s high credit rating of A- with a stable outlook has been revised to a negative outlook by ratings agency Standard & Poor’s.

The revision follows the resignation of the association’s chief executive in March after it went into supervision (HT 26 March, page 13).

Credit ratings are the City’s mark of financial stability and are a guide for investors.

Standard & Poor’s said it had revised the rating because of weak debt-to-equity ratios and the uncertainty surrounding the group’s strategy and senior management changes.

Standard & Poor’s credit analyst Dimitri Popov said: “We believe further efficiency savings can be made, but the lack of strategic direction and uncertainty about senior management leadership will make this very challenging in the near term.

“It’s a warning signal. If they have a strategy in place and deliver results, they will be put back to a stable outlook.”

The association will finalise its long-term strategy at the end of the year and is likely to hire a new chief executive by next year. The finance director is also due to retire.

James Tickell, Shaftesbury’s interim chief executive, said: “They haven’t downgraded our fundamental rating, so we are quite reassured.

“The points they make are entirely fair. Shaftesbury is going through a major strategic planning process and this will reach its conclusion towards the end of this year. Once that is out, it will show where we are going and will reassure Standard & Poor’s and our stakeholders.

“It did not come as a surprise to us and we were pleased the underlying rating stayed the same.”

The Shaftesbury rating announcement follows Standard & Poor’s decision to revise Home Group’s outlook from A+ to A+ with a negative outlook. The group’s outlook was changed because it decided to spend more on maintenance (HT 2 July, page 14).

The changes are unlikely to deter investors as both Home and Shaftesbury still have high ratings. Crucially, their ratings are still well above BBB-, the cut-off mark viewed as a safe bet for investment.

Standard & Poor’s said there was still strong demand for Shaftesbury’s stock. It has moderate levels of debt and an established reputation in care, the agency added.

Shaftesbury was put under supervision last October after an Audit Commission inspection dubbed it “one of the worst-performing housing associations” (HT 24 October 2003, page 13).

Its strategy, repairs service and complex governance structure were criticised.