Creditors Ready to Bid Despite Nationalisation Threat
Thames Water's creditors have signalled they will pursue their bid for the debt-laden utility even if the incoming prime minister, Andy Burnham, brings it into temporary nationalisation. The group of 100 institutional investors, holding about £14bn of Thames's senior debt, are still discussing a £10bn rescue proposal with officials from the regulator Ofwat, according to a report.
Rescue Proposal Faces Opposition
Emma Reynolds, the environment secretary, objected to the proposal in mid-June because it would place an “undue burden” on consumers, pushing Britain’s biggest water company closer towards a special administration regime (SAR). Creditors, however, would want to buy Thames out of temporary nationalisation as they regard it as a process but not a solution, sources said.
Burnham's Position on Public Control
Burnham has called for “greater public control” over Thames and told the Guardian this could mean nationalisation. The future of Thames, which serves 16 million customers in London and the Thames Valley and is buckling under £17.6bn of debt, will be one of the most pressing issues in his in-tray when he enters Downing Street, expected within the next two weeks.
Key Creditors and Their Strategy
The lenders include the US hedge fund Elliott Investment Management, run by billionaire Trump donor and hedge funder Paul Singer, along with Apollo Global Management, Silver Point Capital, BlackRock and M&G. They have been trying to take ownership of Thames without a SAR after Thames’s bosses failed to sell the utility to the US investment group KKR last year. Thames has been trying to stave off financial collapse for nearly three years and could run out of money in October.
Arguments Against Special Administration
The creditor group, London & Valley Water, has argued that an SAR would require multiple billions of pounds of taxpayer money and no one knows how long it would last, creating further uncertainty for the company’s 8,000 workers and its supply chain. Their rescue proposal would inject £3.35bn of new equity into the water company and provide £3.25bn of fresh debt, while Thames would be spared fines for pollution of rivers and the sea for four years.
Other Potential Bidders and Precedent
Other potential bidders for Thames have called for an SAR, including Hong Kong-based CK Infrastructure Holdings, the majority owner of Northumbrian Water. Castle Water, which runs billing services for Thames Water’s business customers, has also signalled it wants to bid. Four years ago, the government recovered nearly the entire cost of temporarily nationalising the energy provider Bulb after agreeing to sell it to its rival Octopus for £3bn.
What a Special Administration Regime Entails
Under an SAR, Thames would be run by an independent insolvency expert on behalf of taxpayers to maintain services before finding a buyer. Its debt and interest payments could be temporarily frozen. However, the government would have a duty to seek maximum value for creditors in an SAR.
Company and Regulator Responses
A Thames Water spokesperson said: “We continue to work with all parties to reach an agreement that supports Thames Water’s long-term financial stability and ensures the uninterrupted delivery of our biggest infrastructure upgrade in 150 years while continuing to meet the needs of our 16 million customers.” The creditor group declined to comment. The government and Ofwat have been contacted for comment.
