U.K.-Based Homebuilder Keepmoat 'B' Rating Withdrawn At Issuer's Request

LONDON (S&P Global Ratings) March 13, 2019--S&P Global Ratings today withdrew 
its 'B' long-term issuer credit ratings on U.K. homebuilder Keepmoat (Keystone 
JVco Ltd.), at Keepmoat's request. The outlook was stable at the time of 
withdrawal. We also withdrew our issue rating on its senior secured notes, 
which have been redeemed. 

Keepmoat is a homebuilder in the U.K., operating in the affordable segment. 
The company covers the entire value chain, from purchasing land to producing 
homes, and it built 3,717 units in the year ending March 2018, with revenues 
of £556 million.

In November 2018, Keepmoat successfully agreed a new term loan facility to 
refinance its £100 million senior secured notes, which had been due to mature 
in October 2019. 

Keepmoat's business risk profile reflects our view of the inherent volatility 
and cyclicality of the homebuilding industry in the U.K.'s highly fragmented 
housing market, characterized by low margins and low barriers to entry. We 
also note Keepmoat's reliance on government spending and initiatives such as 
the Help To Buy scheme, which 50% of its customers use. This is a much higher 
proportion than the average for other U.K. homebuilders (25%-35%).

Even though the U.K. housing market has cooled in response to the 
uncertainties regarding the Brexit process, we think that demand for 
affordable housing should remain robust in the medium-to-long term, given 
Keepmoat's regional focus outside London and the southeast, and the structural 
supply and demand imbalance in the U.K. housing market. 

Our assessment of Keepmoat's financial risk profile reflects the company's 
moderate leverage, indicated by a debt-to-EBITDA ratio of debt below 4x; 
increasing working capital needs inherent to the industry; and the company's 
relatively small absolute cash flow base.

We also take into account the company's private equity ownership, which could 
push the company toward more-aggressive leverage compared with listed 
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