Thames Water Creditors Indicate Urgent Need for Solution

Creditors of Thames Water have expressed that there is “a very short and closing window” for the beleaguered water utility to avert nationalisation following KKR’s withdrawal from a significant financing package.

The consortium of lenders, representing £13 billion of Thames Water’s total debt of £15.7 billion, emphasized the need for “an urgent and fundamental reset” as the company races against time to orchestrate a market-based rescue that would benefit the 16 million customers it serves.

These creditors revealed they have submitted “a detailed long-term turnaround plan that aims to address the root causes of Thames Water’s challenges, restore its financial health, regain customer trust, and fundamentally improve the business for the long term.”

The creditors also stated, “Discussions with Ofwat and the government are expected to progress in the upcoming weeks to finalize an agreement that will be advantageous for both customers and the environment.”

Previously, KKR had been designated as the sole preferred bidder during the spring, proposing a £4 billion recapitalisation of Thames, complemented by up to £3 billion in bridging loans from senior creditors. However, the private equity firm retracted its offer amid concerns that the negotiations were becoming politicized.

This development occurred shortly after Thames Water was penalized with a historic £123 million in fines and sanctions by the regulator Ofwat for multiple pollution infractions, as well as for distributing internal inter-company dividends to shareholders, a practice it had been prohibited from executing.

The company is being kept afloat through arrangements with a new class of super senior creditors, who are supporting Thames Water on the condition that it secures a new equity investor to replace the shareholders who abandoned the company 15 months ago, withdrawing their promised recapitalisation funds and writing off their investments due to concerns about the company’s viability.

In the House of Commons, Environment Secretary Steve Reed dismissed the prospect of total renationalisation of the water sector this week, yet indicated that for Thames Water, the government “stands ready for any eventuality and will take action as required.”

Sir Adrian Montague, the chairman of Thames Water, reiterated the company’s belief that a sustainable recapitalisation is vital for all stakeholders and expressed the commitment to continue collaborating with creditors and stakeholders to meet this objective.

He further commented that the company would “advance discussions regarding the senior creditors’ plan with Ofwat and other involved parties.”