THAMES Water Utilities seeks to raise up to £3 billion (S$5.1 billion) from its creditors to buy the company more time to avoid going into special administration early next year, showed a proposal on Friday (Oct 25).
The UK’s largest water and sewage provider said it wants an agreement to borrow more money and extend existing debt that will mature next year. It also wants access to cash reserves to avoid running out of operating capital by the end of December.
Without a restructuring and new funds, the heavily indebted utility would likely be temporarily nationalised. Existing investors want to avoid that because a prolonged period under government control could mean they recover less of the money they lent.
Under the proposal, Thames Water is seeking to obtain up to £3 billion in super senior funding, made up of an initial tranche of £1.5 billion. Its liquidity would be extended to October 2025.
The beleaguered utility said the plan has the backing of creditors representing about £6.7 billion of its £15 billion debt pile. Most of them are holders of its more senior-ranked, Class A debt.
“Today’s news demonstrates further progress to put Thames Water onto a more stable financial footing as we seek a long-term solution to our financial resilience,” said the utility’s chief executive Chris Weston.
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Time is not on the company’s side. It has been waiting for a key decision from regulator Ofwat on the industry’s price controls for the next five years, including the rate of return for investors.
The decision is due on Dec 19, but could be pushed into January because this year’s UK election delayed the process.
Under the proposal, Thames Water could further extend the maturities of some existing debt to May 2026, if it decides to make an appeal to the UK’s Competition Markets Authority against Ofwat’s final determination.
It could also access a further £1.5 billion across two tranches of £750 million in those circumstances.
While the agreement has the backing of Class A creditors, a separate group of creditors that holds Thames Water’s riskiest debt have drawn up different plans to provide the utility with a loan of at least £1.5 billion, Bloomberg reported on Thursday.
Ofwat welcomed its proposal and said that it was a “positive step towards extending its liquidity runway and seeking a market-based solution to the company’s problems”.
The regulator added that there were safeguards to protect services provided to the utility’s customers, regardless of the issues faced by Thames Water. BLOOMBERG
