Inside Homes – News – Specialist landlord for key workers retains AA

In its report, S&P explained how Local Space’s planned refinancing of future maturities through private placements and its “modest acquisition program” will result in “very strong liquidity” and stable debt levels over the next two years.

The rating agency predicted interest coverage would weaken, but Local Space’s management would “mitigate risk” by taking on a higher proportion of fixed-rate debt.

The owner’s “unique operating model” and “local authority arrangement” will continue to support “strong financial performance relative to peers,” S&P added.

The outlook returned to stable after a refinancing period that swapped floating rate financing for fixed interest rates.

S&P said it could downgrade Local Space if the group changes its strategy, leading to “significantly weaker financial indicators”. An upgrade would depend on “significantly stronger debt values.”

“Local Space will maintain its improved liquidity position, supported by a strengthening of group treasury planning and a reduced acquisition programme, which will limit capital needs,” S&P said. “We believe Local Space will use the flexibility in its capital program to invest in existing assets.”

S&P predicted Local Space would also grow through its new leasing program with Newham Council. Last year Local Space agreed to lease 102 new homes originally built for open market sale, which were bought by Newham Council for use as affordable housing.

The rating agency said Local Space’s financial performance will “weak modestly” due to Local Space’s expansion into the lower-margin rental program and inflation affecting repair costs. However, it said: “We still project that the group’s unique long-term arrangements with local authorities will support adjusted EBITDA margins considerably higher than peers.”

Josie Parsons, chief executive of Local Space, said the credit rating was due to “our very strong liquidity and stable debt levels, which given the ongoing difficult economic environment is a real achievement”.

She continued: “Crucially, it means we can continue to provide high quality housing and help those experiencing homelessness in East London by working with our partner organisations.”