S&P views Yorkshire Water negatively

S&P said it changed its outlook for Yorkshire Water Services Ltd.’s debt to negative from stable but kept the stable outlook on its AA issue rating on the senior secured bonds issued by YWS and guaranteed by Assured Guaranty Europe plc.

“High inflationary pressures will deteriorate the rating headroom on YWS' debt,” S&P said in a press release.

“On top of inflation-linked financing, which accounts for approximately 30% of total debt at the end of March 2022, YWS has a large exposure to derivatives relative to its RCV compared with other water companies. Its portfolio of index-linked swaps has a notional amount of about £1.3 billion over the same period. We, therefore, expect inflation will continue to raise financing costs in financial year 2023 (ending March 31) and financial year 2024 given the higher level of noncash accretion that we expect YWS to incur during these years,” the agency said in a press release.

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