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Fitch downgrades Thames Water debt rating

by Trevor Loveday

Fitch Ratings has downgraded the debt rating of Thames Water’s holding company Kemble Water Finance to below investment grade.


The ratings agency said the fall to a CCC rating reflected Kemble’s need to “engage with syndicated banks to amend and extend the £190 million loan due April 2024 under terms that could be viewed as a distressed debt exchange under our criteria.”


Additional drivers behind the downgrade were “rising liquidity pressure due to increased regulatory and political scrutiny of the dividend distribution from Thames Water to Kemble.” The ratings agency said the visibility of Kemble’s future  liquidity  was “limited beyond end-March 2024”.


Fitch said it foresees “material challenges beyond the next few months” due to the conditional nature of equity contributions to Thames Water from shareholders in the remainder of AMP7. It added that visibility of regulatory development and further shareholder support in AMP8 was also “limited”.


It said improvement in Kemble’s  profitability and in its prospects for future dividend distributions would depend on  “a strong operational turnaround” at Thames Water.

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