Thames Water creditor group in talks with Ofwat over rescue deal - report

9th Oct 2024 12:27

(Sharecast News) - Lenders holding £12bn of Thames Water's debt have reportedly held face-to-face talks with Ofwat this week to pitch a rescue deal that they believe would avert the nationalisation of Britain's biggest water utility.

According to Sky News, a creditor group advised by investment bank Jefferies met officials from the industry regulator on Tuesday to present the outline principles of a business plan that could buy the company vital breathing space.

City sources told Sky the group now accounted for over £12bn of Thames Water's borrowings - roughly two-thirds of its total debts - and comprised 100 separate lenders.

It was understood the syndicate is racing to find a solution that would allow a restructuring that would incorporate a massive debt-for-equity swap and see fresh equity injected into the crisis-hit utility.

A deal needs to be agreed by the middle of November because Ofwat is due to sign off its final regulatory determination for the company's business plan at a board meeting in the second half of the month.

Creditors argue that Ofwat needs to demonstrate flexibility in its consideration of Thames Water's business plan in order to make the company investible.

Sky said further details of the creditor group's proposals were unclear on Wednesday, although flexibility in relation to customer bill increases will inevitably be a component.

Thames Water is also facing a litany of regulatory fines over its poor customer service performance and dire record on sewage and water leaks.

Plans for an emergency liquidity facility of more than £1bn are also being drawn up, although they are yet to be finalised.

That finalising would buy Thames Water several months more to finalise a rescue plan.

Bankers at Rothschild have been trying to drum up investment in new Thames Water stock in recent months, but with little success amid a lack of visibility about the company's survival prospects.

Sky News reported last month that US investment giant Carlyle had become the latest global fund to weigh an investment in Thames Water.