LONDON: Thames Water is pursuing talks with some of its creditors about a 1 billion pound ($1.34 billion) lifeline to give it space to restructure 16 billion pounds of debt and avoid the threat of administration, two sources with knowledge of the matter said.
Britain’s largest water company warned last week it could run out of money in three months if the majority of its creditors do not approve further borrowing to tide it over, according to Reuters.
Without a clear rescue plan, the government or the water regulator could decide to place Thames Water into a so-called special administration regime (SAR) to ensure it continues to serve 16 million people in London and the surrounding region.
The crisis is coming to a head as Britain’s new Labour Government seeks billions of pounds of capital to upgrade the country’s infrastructure, with water only one entry on a long list that also includes power grids, rail and roads.
Investor confidence at stake
If Thames Water did end up in administration, the likely debt holder losses could shake wider investor confidence and raise the cost of financing for other water companies.
To avoid a SAR, Thames Water is in talks with one group of creditors on an interim liquidity facility of up to 1 billion pounds, with a deal possible within weeks, the two sources said.
This line of credit would be key to keeping Thames Water going until it can agree a longer term debt restructuring and raise up to 3.25 billion pounds in new funds, they added. At the same time, this group of holders of approximately 10 billion pounds of Thames Water bonds are working to find an equity solution and enlist a partner with capital and credibility in infrastructure investment in case the company is not able to resolve the issue itself, one of the sources said.
The company is working separately with investment bank Rothschild and law firm Linklaters to raise the new money itself and has sounded out potential investors, five sources said.
Restructuring deal plan
Thames Water and its largest organised group of creditors also aim to have its rescue plans ready soon, with court dates booked for November and December for a potential restructuring deal to be approved, three sources said.
