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Macquarie has agreed to inject as much as £1.2bn of contemporary fairness into Southern Water as a part of a deal that may end result within the debt owed to its holding firm lenders being lower by greater than half.
As a part of the deal Macquarie, Southern’s proprietor, has dedicated to speculate £655mn of fairness initially into the utility — which offers water and sewerage companies to 4.7mn clients within the south-east of England.
The Australian investor intends to offer a minimal of £245mn in further fairness by December, a sum that might rise to as a lot as £545mn.
Whereas Southern’s funds are much less fraught than these of Thames Water, the UK’s largest water utility, it has nonetheless come below stress in debt markets over issues it might breach its covenants.
This yr Southern requested bondholders together with Ares Administration and Australian infrastructure investor Westbourne Capital to write down off all of their roughly £370mn of debt, the Monetary Occasions beforehand reported.
The writedowns have been seen as a method to enable new fairness to movement straight into the utility’s heavily-indebted working firm, fairly than getting used to service debt additional up the capital construction.
Ares and Westhouse maintain debt at Southern’s prime holding firm degree, far-off from the utility’s working belongings, making it dangerous for buyers to personal.
The writedowns will cut back the quantity of debt throughout Southern’s holding firms from £865mn to £415mn. Bondholders have been given concessions in change for accepting writedowns, in line with an individual aware of the matter.
The maturities of the remaining debt amenities are being prolonged to no less than September 2030.
In February, Macquarie dedicated to injecting £900mn of contemporary fairness into the corporate, a rise on the £650mn it had promised beforehand.