Standard & Poor's Ratings Services said it has lowered its issuer credit rating on Houston Housing Authority (HHA) by one notch to A-plus from AA-minus.

The outlook is negative.

The lowering of the rating reflects Standard & Poor's view of: the weak financial performance due to reductions in federal subsidies, the low EBITDA-to-revenue ratio, the draw on reserves to cover an ongoing deficit in the authority's Housing Choice Voucher (HCV) program, the negative trend in net operating income (NOI), and the rising expenses.

The aforementioned weaknesses are partially offset by Standard & Poor's view of these strengths: the strong overall operational performance and portfolio quality, the well-established strategic plan supporting the authority's mission to provide quality low-income housing, and the very strong essentiality for HHA housing, evidenced by a waiting list of over 30,000 applicants for public housing and HCVs.

"The negative outlook reflects our opinion of HHA's low EBITDA-to-revenue, volatile NOI, and draws on reserves to cover the HCV program deficit," said Standard & Poor's credit analyst Stephanie Morgan. "Key factors to maintaining the rating are HHA's ability to manage its deficit and volatile NOI, engage in business activities that provide additional income sources, leverage resources to carry out its development plans, and increase long-term net working capital. If we see these factors moving in a positive direction, we may revise the outlook to stable. However, if net working capital, reserves, and profitability and coverage ratios continue toward levels below those commensurate with the current rating, we could lower the rating."

One of the largest public housing authorities nationwide, HHA is established under Texas law to provide public housing and related services for the city of Houston.

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