RPT-Fitch: Negative Outlook for UK Whole Business Securitisations in 2014
Dec 10 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings says in a newly-published report that its outlook for UK pub and healthcare whole business securitisations (WBS) is predominantly negative for 2014. This is driven by a fragile UK economic recovery, public spending austerity, and regulatory pressures.
"Continuing decline in average real income, combined with public spending cuts mainly affecting healthcare funding as well as various regulatory pressures are all holding back the outlook of the WBS sector," says Stefan Baatz, Senior Director in Fitch's Global Infrastructure team in London.
Fitch expects certain transactions to be more resilient. Performance of managed pubs has remained comparatively strong with sales still up across the board. The traction driven by their food offering is expected to continue in 2014. On the contrary, tenanted pub companies' like-for-like profits are still declining on average at 2%.
Furthermore, regulatory pressures could affect most WBS sectors in 2014. Tenanted pub companies could be subject to increased profit-sharing with their tenants impacting the pub companies' profitability. This was suggested by the Business, Innovation and Skills Committee ruling which is expected to be addressed during the next parliamentary session in 1H14. Care home operators also face tighter regulation. The Care Bill currently going through parliament proposes to establish the Care Quality Commission as the financial regulator of the care home sector, overseeing the finances of 50 to 60 of the largest care companies in England. Furthermore, large private hospital operators are being scrutinised by the competition commission with preliminary findings suggesting too much 'market power' in many local markets leading to higher prices for patients.
Given the diversity within the universe of Fitch-rated WBS transactions, rating actions have not followed the same path across sub-sectors. However, the key trend is that healthcare ratings have increasingly been downgraded, driven by poor trading performance combined with refinancing pressures. Among pub securitisations, which had in the past been subject to the bulk of the downgrades, only one debt tranche was downgraded in 2013.
The report, entitled '2014 Outlook: UK Whole Business Securitisation' is available at www.fitchratings.com.
Link to Fitch Ratings' Report: 2014 Outlook: UK Whole Business Securitisations (WBS)
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