Creditors put a more conciliatory offer on the table for Thames

London & Valley Water, the consortium of Thames’ creditors and potential investors, has submitted another revised and more conciliatory proposal to stabilise Thames Water. The offer to inject finance, bring in new senior management, retain existing senior management and re-list the company in the medium term could be politically attractive. It requires neither direct government intervention nor taxpayer support.

The consortium offered to write-off of approximately £4bn pounds of its Class A debt and £1bn pounds of Class B debt which, alongside the write-off of £2.5bn of holdco debt, will reduce the utility debt burden to around £14bn.

It intends to inject £5.4bn of funds, of which £3.15bn would be equity and £2.25bn would be new debt. It considered that this would be sufficient to stabilise Thames’ current balance sheet and underpin future investment. In exchange for the debt write-off, Class A debtors will receive a minimum of 10% of the new equity.

It continued to ask that Ofwat sets "stretching but achievable" performance targets, which involves reducing targets for sewage spills and water leaks.

Thames, the consortium said, could achieve a 30% reduction in sewage outflows by 2030. No dividends will be paid to shareholders throughout the turnaround period, and new shareholders would commit not to sell the business before March 2030. All outstanding fines will be paid under the proposed plan — a compromise compared to earlier proposals.

The longer-term plan, set out in the proposal, is to list Thames Water on the stock market by 2030. Senior managers, excluding the chief executive, have been offered retention payments as part of the financing arrangements.

The proposed measures would reduce Thames Water’s regulatory gearing from 84.4% to 53%, potentially restoring its investment grade rating within 18 months. The consortium aims to reach an agreement with Thames Water and Ofwat by 22 October, ahead of the final deadline for companies to appeal to the Competition and Markets Authority (CMA) regarding bill increases. Thames Water has delayed its submission while refinancing negotiations continue but may still appeal to the CMA by the deadline.