S&P Global Ratings has indicated they could raise Octavia’s current ‘BBB’ rating due to ‘stronger creditworthiness’ of Abri

S&P Global Ratings has said it could raise the credit rating of troubled Octavia Housing’s credit rating if a merger with 50,000-home Abri goes ahead.

The statement from the credit rating agency follows last week’s announcement that Abri is in discussions about a possible deal to take over Octavia, which is currently non-compliant with the Regulator of Social Housing’s governance and financial viability standard because of its poor financial planning and ‘unrealistic budgets’.


Source: Octavia Housing

Octavia Group’s credit rating likely to improve if merger with Abri goes through

S&P Global Ratings noted that Abri has historically reported stronger financials compared with Octavia, which means they expect the combined entity would have stronger creditworthiness.

The global credit ratings agency expects that the combined group will have a “stronger creditworthiness” than 5,000-home Octavia would have alone.

>>See also: Why are housing associations merging?

Its update on 24 November stated: “This is partly because Octavia, which is financially weak in our view, would account for a comparatively small share of the combined group”.

S&P Global Ratings anticipates that the combined group’s large asset base could help mitigate cost pressures through economies of scale.

Sandra Skeete, chief executive of Octavia,  said: “We are pleased to have this positive response to Octavia’s decision to choose Abri as its preferred partner. While discussions are at an early stage, both parties are working hard to deliver the partnership.”

Octavia also announced this week that it has hired Kevin Bolt as managing director to lead the troubled association. Bolt, formerly chief executive of 19,500-home BPHA, will take over in January, when chief executive Sandra Skeete stands down.