Key Points
- Thames Water is nearing a £16 billion rescue deal with lenders. Creditors may write off up to 30% of the debt they own.
- The deal aims to prevent the government from taking over the company.
- Lenders would receive at least a 10% ownership stake in exchange.
- The company faces massive debts and fines for sewage pollution.
Britain’s struggling water giant, Thames Water, is reportedly close to finalizing a £16 billion rescue package with its lenders. The deal aims to keep the utility company under private ownership and prevent the government from stepping in to run it temporarily. A group of creditors, who hold the majority of the company’s debt, hopes to sign an agreement with the regulator, Ofwat, by the middle of February.
Thames Water provides water to 16 million people, but it has faced a brutal year. The company is drowning in £20 billion of debt and has suffered major reputational damage due to environmental scandals.
Regulators have fined the utility over £100 million for repeatedly dumping sewage into rivers and waterways. These financial and operational crises pushed the company to the brink of collapse.
The proposed rescue plan requires the lenders to make significant sacrifices. To save the company, creditors are discussing a “haircut” on the money owed to them. They may agree to write off up to 30% of the Class A debt, which is higher than the 25% loss discussed last October. In total, the plan expects to wipe out more than £13 billion of existing value.
Major investment firms, including Elliott Management, Invesco, and Silver Point Capital, are involved in these talks. In exchange for accepting these heavy losses, the creditors would receive an ownership stake in the restructured company. Reports suggest they would get at least 10% equity in the new Thames Water.
This deal follows a smaller victory last year when the company secured a £3 billion emergency loan to stay afloat. That cash stopped an immediate collapse, but the company needs a permanent fix to its balance sheet.
If the lenders and the regulator can agree on terms, Thames Water will go to court to formalize the plan. This would allow the utility to continue operating without forcing British taxpayers to bail it out.
