Group of creditors holding approximately £10 billion of Thames Water’s £15 billion senior debt are set to gain access to the company’s financial records and regulatory business plan. This move comes as they attempt to formulate a strategy to reduce the utility’s debt and address its urgent need for fresh capital. The creditors have set themselves a tight ten-week deadline to develop proposals before approaching Ofwat, the water regulator.
Their primary objective is to prevent Thames Water from falling into special administration, a scenario that could have far-reaching consequences for the UK water sector. Thames Water, the largest of Britain’s privatised regional water monopolies, has found itself in dire financial straits following years of hefty fines for pollution, leaks, and subpar service. The company’s net debt has ballooned to over £16 billion, exceeding 80 per cent of its regulated asset value—far above Ofwat’s proposed 65 per cent cap for water companies.
The utility’s predicament has been exacerbated by a loss of confidence from credit rating agencies and a recent exodus of its nine international investors, who declared the company “uninvestable” and wrote off their investments in March. The Thames Water Creditors’ Group is exploring solutions that would avoid special administration and prevent its members from facing losses on their holdings. One potential strategy involves swapping some debt for equity stakes, aiming to reduce Thames Water’s borrowing to approximately £13 billion.
If no viable solution emerges by late November, and in the absence of new equity investors willing to inject up to £4 billion into the company, Thames Water could face the appointment of special administrators. Such a move could potentially trigger a domino effect, jeopardising the financial stability of other troubled water companies like Southern, South East, Anglian, and Yorkshire. As the clock ticks down, all eyes are on the creditors’ group to see if they can devise a plan that satisfies both Ofwat’s requirements and the urgent need to stabilise Thames Water’s precarious financial position.
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