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Troubled London landlord in merger talks kept on CreditWatch placement by S&P
S&P is keeping its CreditWatch on Octavia Housing, which is in merger talks with larger landlord Abri, as it said “sufficient information” is not yet available to resolve the placement.
Octavia Housing’s head office (picture: Google Street View)
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London-based Octavia, which is currently non-compliant with the regulator’s standards, was originally placed on a CreditWatch with positive implications footing with S&P six months ago.
At the time, S&P said it expected to resolve the CreditWatch once it had “further assurances” that 5,000-home Octavia’s tie-up with 50,000-home Abri would go ahead. Octavia currently has a ‘BBB’ credit rating with S&P.
However, in an update this week, the ratings agency said: “Sufficient information to resolve the CreditWatch placement has not yet been made available, but we anticipate resolving it before the end of the calendar year.”
In its report, S&P added: “We do not expect Octavia to breach its loan covenants, although we understand that its headroom has materially reduced.”
Octavia is one of England’s oldest housing associations and was founded in 1865 by philanthropist Octavia Hill.
On the talks between Octavia and Abri, S&P said this week it understood they are “continuing and that there is close co-operation between the leadership teams of both organisations”.
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In its report, the agency said that if Octavia did join Abri, the “creditworthiness of the combined entity is likely to be stronger than that of Octavia alone”.
In its last reported full year to the end of March 2023, Octavia posted a group surplus of nearly £3m, on turnover of £57.2m. Its accounts for its last financial year, ending March 2024, have yet to be published.
An Octavia Housing spokesperson said: “We note that S&P has maintained its BBB rating on Octavia on CreditWatch with positive implications.
“This reflects S&P’s view that our proposed partnership with Abri Group is likely to have stronger creditworthiness than that of Octavia alone. We are continuing to work towards the proposed partnership with Abri, to which Abri also remains fully committed.”
The two landlords first revealed publicly they were in “partnership discussions” last November.
The announcement came less than three months after Octavia was downgraded to non-compliant G3/V3 ratings by the Regulator of Social Housing (RSH). The downgrades were partly over Octavia’s poor-quality financial data and weaker-than-budgeted financial performance, the RSH said.
Following the downgrades, S&P lowered its credit rating on Octavia to BBB from BBB+.
The landlord has also seen significant changes in its executive team in the past 18 months.
Former BPHA boss Kevin Bolt took over as Octavia’s interim chief executive in January this year after the departure of Sandra Skeete.
Lynsey Bradshaw resigned as Octavia’s finance boss in September 2022. After that, two people held the job on an interim basis, before Adam Barrett, the former finance director of Sutton Housing Partnership, took up the reins last June.
Alison Muir, a former St Mungo’s executive, was appointed Octavia’s chief operating officer in September.
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