Comment piece - 24Housing

S&P Global Ratings has assigned its 'A+' long-term issuer credit rating to UK-based social housing association Stonewater Ltd. John Bruton, Stonewater Executive Director Finance, explains how this was achieved.


Stonewater was very pleased to have been awarded an A+ long-term issuer credit rating in August by Standard & Poor’s (S&P) based on the global ratings agency’s assessment of our financial results, methods of operation and our operating environment.

This A+ rating is one of the strongest ratings in the housing sector and helps us to obtain funding on the best terms for our new development programme through which we are increasing our delivery to 1,000 units a year of social and affordable rented housing and affordable home ownership.

In awarding the A+ credit rating S&P cited Stonewater's focus on core social housing services which promotes predictable income streams, and mitigates pressures from welfare reforms. Stonewater displays only modest exposure to market-related risks.

Our prudent response to regulatory changes, through rationalisation and cost savings, supports our credit strength. S&P reported a stable outlook for Stonewater’s already solid profitability as we implement our development plans, particularly thanks to continuous cost reduction and contained debt through 2021.

The rating reflects that S&P expects Stonewater to benefit from operating in an industry of low risk, predominantly due to its anti-cyclical nature and strong oversight from the Regulator of Social Housing. Operations also profit from the company's widespread geographical reach.

Stable financial performance has also been achieved through efficiently managing costs. S&P viewed positively our extensive programme to digitalise internal processes, supporting improved communication across stakeholders and increased customer satisfaction. Stonewater's effective cost management has included efficiency measures such as the rationalisation of our offices, and reducing headcount.

S&P also considers the quality of our assets to be a rating strength. Stonewater’s property portfolio is relatively young, with an average age of 25 years, and assets are consistently maintained to a high standard. Voids are low, and arrears are currently modest.

Our management team has demonstrated that it proactively responds to changes in the sector and the markets, and has started to investigate alternative ways to generate income. Although we will remain focused on traditional social housing we will gradually increase our market-related activities to help fund our operations.

S&P’s ‘stable’ outlook reflects its expectation that Stonewater will continue to benefit from its strong asset quality and operations. Also, that management will succeed in implementing our development plan such that Stonewater’s financial performance and debt leverage will remain solid over the next two years.