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Thames Water faces a summer season of uncertainty as regulator Ofwat deliberates on a backup plan by the utility’s senior collectors to offer recent fairness of practically £4bn to rescue the utility.
The group of Thames Water’s top-ranking bondholders is now the de facto frontrunner to take management of the UK’s largest water firm after US non-public fairness agency KKR walked away from its proposal to recapitalise the corporate earlier this week.
The “class A” bondholders — which embrace giant US funding companies akin to Apollo World Administration and UK asset managers akin to Aberdeen — have signed new fairness commitments approaching £4bn, in response to a number of folks accustomed to their proposal.
This constitutes new funding they’d inject into the corporate, along with a parallel emergency £3bn mortgage for which Thames Water secured courtroom approval earlier this yr. The funds stopped it from toppling into short-term renationalisation below the federal government’s particular administration regime.
The collectors’ plan would additionally apply a writedown to Thames Water’s current debt and would have the potential to permit new lower-cost loans to exchange outdated ones.
Nonetheless, the plan requires each sign-off from Ofwat and the courts. The emergency mortgage was solely authorised after a prolonged authorized battle from rival bondholders.
Folks near each the corporate and Ofwat acknowledged that the approval course of may take a minimum of two months. Excessive Courtroom hearings to approve the restructuring would then be anticipated to start within the autumn.
The headline fairness injection and different parts of the plan are broadly much like KKR’s proposal, a few of the folks added. KKR had envisaged £4bn of recent fairness, but in addition opened the door for collectors to offer practically 50 per cent of this complete.
The senior collectors, which personal a majority of the £17bn of debt that sits on the prime of Thames Water’s near-£20bn debt pile, submitted a 380-page turnaround plan to the utility and Ofwat final week.
The group ran an intensive due-diligence course of alongside KKR and likewise attended a lot of web site visits in and round London. KKR’s due diligence package deal has additionally now been made obtainable to the collectors, a number of folks accustomed to the method confirmed.
Mike McTighe, who led the turnaround of BT’s Openreach after turning into chair in 2016, is appearing as a senior adviser to the creditor group.
“The Collectors have submitted an in depth, long-term turnaround plan that may repair the basis causes of Thames Water’s issues, restore its stability sheet, rebuild buyer belief and repair the basics of the enterprise as soon as and for all,” the creditor group stated on Tuesday.
A number of folks concerned in negotiations stated it will not be possible to reopen the fairness course of to different bidders that had been jilted when Thames Water granted KKR exclusivity in March.
Nonetheless, a few of these bidders are nonetheless searching for a chance to participate in a rescue.
Fort Water — a provider of water to companies — stated on Tuesday it was “prepared, prepared and capable of help the enterprise with the requisite financing in place”.
CK Infrastructure, which submitted a preliminary £7bn bid for Thames Water in February, has approached the creditor group’s advisers to see if the agency can play a task of their recapitalisation of Thames Water, in response to folks accustomed to discussions.
The collectors usually are not actively searching for new companions, nevertheless, and have sufficient dedicated funding in place from their group to cowl their plan, in response to folks accustomed to their place.
CKI didn’t instantly present a remark. Thames Water and Ofwat declined to remark.
