Thames Water Creditors Surface as Fifth Potential Bidder in Utility Takeover Race

The creditors behind Thames Water’s £3 billion rescue package have emerged as surprise contenders in the battle to take control of Britain’s largest water utility. The development adds an unexpected twist to an already complex sale process, as these financial backers consider transforming their debt positions into equity ownership.

The High Court’s recent approval of an emergency bailout structure has established a new “super senior” class of creditors, providing vital financial support through a two-phase funding arrangement. The initial £1.5 billion injection will sustain operations until autumn, followed by an equivalent sum securing the company’s position through to 2026.

Rothschild & Co, orchestrating the parallel search for new shareholders capable of investing an additional £5 billion, has already attracted four serious bidders. The contenders include a Covalis-led hedge fund consortium, the Pears family-backed Castle Water, KKR’s infrastructure division, and CK Infrastructure, controlled by Hong Kong magnate Sir Li Ka-shing’s empire.

City sources reveal that CK Infrastructure’s bold £7 billion proposal comes with significant strings attached, requiring existing creditors to accept substantial write-downs on their holdings. However, as the senior creditors now effectively hold economic ownership of Thames Water, their consent remains crucial for any successful takeover bid.

The creditors’ emerging strategy could involve assembling their own takeover consortium, combining institutional and infrastructure investors to form a fresh shareholder structure. Their vision encompasses an equity injection coupled with debt restructuring to restore Thames Water’s investment-grade credit rating, potentially culminating in a return to public markets after a 24-year absence.

The intensifying competition for Thames Water’s control underscores the strategic importance of UK water infrastructure assets and highlights the complex interplay between debt holders, potential investors, and regulatory requirements in the utilities sector.