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Thames Water’s battle for survival intensified on Friday when debt holders fell out over a proposed £1.5bn emergency mortgage and restructuring plan that might assist the UK’s largest privatised water utility stave off monetary collapse by Christmas.
Disaster-struck Thames, which gives water and sewerage companies to about 16mn households in south-east England, is struggling underneath a £19bn debt load and has confronted lukewarm demand for an try to lift as a lot as £3bn in fairness from infrastructure buyers.
On Friday, a bunch of collectors wrote to Thames Water complaining that they’d been minimize out of negotiations round a brand new mortgage to forestall a money crunch on the utility, which has warned that it dangers working out of available liquidity shortly after Christmas.
These collectors, which maintain a number of the utility’s lower-ranking bonds, have employed heavyweight litigation regulation agency Quinn Emanuel to symbolize their pursuits, after a big bondholder group ejected them on Thursday.
“Our shoppers are involved that [Thames Water] and its advisors look like near launching a restructuring plan with out having consulted an necessary creditor constituency,” Quinn Emanuel wrote to Thames Water’s authorized advisers on Friday night.
Thames Water declined to remark.
The dispute raises the stakes within the firm’s bid to keep away from monetary collapse, given the sheer numbers of collectors that want to achieve settlement on any proposal. The corporate dangers being renationalised underneath the federal government’s particular administration regime if it can’t agree a restructuring with collectors.
The collectors behind Friday’s letter embody hedge funds, banks and insurers, based on folks accustomed to the matter, and symbolize a good portion of Thames Water’s £1.4bn of sophistication B debt. They stand to take heavy losses or have their bonds worn out ought to the corporate be renationalised. The utility’s class B bonds had been buying and selling at lower than 20 pence within the pound on Friday, reflecting their low restoration expectations.
Holders of those lower-ranking bonds had been ejected earlier this week from Thames Water’s largest creditor group of greater than 100 establishments, which owns greater than £10bn in bonds.
A few of this group’s remaining class A debt holders have been negotiating a restructuring plan and emergency mortgage of at the least £1.5bn that might rank forward of all present debt, based on folks accustomed to discussions.
This group’s advisers warned the category B holders on Thursday of a “vital threat of a battle of curiosity” rising between them and higher-ranking class A holders. Thames Water has about £16bn of sophistication A debt excellent, and this could rank forward of the category B debt in a particular administration or insolvency.
The most important holders throughout the class A bondholder group have been negotiating with Thames Water round a “new cash” mortgage with an purpose of formally proposing phrases within the coming weeks, based on folks near the discussions.
“It’s clear that negotiations with a single creditor group can’t result in the objectively finest obtainable deal for [Thames Water],” Quinn Emanuel’s attorneys wrote on Friday. “It’s also important that any new cash contribution isn’t structured in such a method that limits the runway for an equity-raising course of.”
The letter additionally claimed that the category B holders would be capable to “contribute vital new cash” to Thames Water and will probably “present funding on aggressive and probably engaging phrases”.
