Thames confident of securing liquidity lifeline ahead of tomorrow’s court hearing
Thames Water’s chief financial officer, Alastair Cochran, said the company is “as confident as we can be” ahead of a convening hearing at court tomorrow seeking approval for its restructuring plan.
More than 75% of Class A creditors have signed up to support a £3bn credit lifeline ahead of the hearing, and chief executive Chris Weston urged “all creditors to support the process on the table”. The management team was speaking as Thames announced its half-year results.
Challenge from dissenting creditors seems to be the biggest risk, despite public objections from some campaign groups. For instance, public ownership, anti-sewage and consumer rights campaigners protested outside the Defra building last week, claiming the £3bn credit deal would cost customers an extra £263 a year given the high coupon of 9.75% plus fees. Weston, however, was clear that customers will not pay any extra; he said it is a short-term facility ending within two and a half years, which will not be added to bills and will not even be in Thames’ debt stack for AMP9. If approved by the court, the plan could be effective by 31 January.
In total, Thames has put together a £6.5bn package of new liquidity and maturity deferrals, to enable it to progress its equity raise and holistic recapitalisation, and complete the PR24 final determination process including an appeal to the Competition and Markets Authority if necessary. The package comprises:
Accessing cash reserves.
A £3bn new super senior facility, the first £1.5bn of which is backstopped by creditors.
A two-year extension of all debt maturities, deferring £3.2bn of maturities currently due to January 2027.
Suspension of financial covenants.
Regarding equity bids, some of which have already received media coverage, Weston would not comment on the number Thames has received or their details. However he said he was “very comfortable” that there had been “considerable interest with credible investors participating” and a number of “indicative, non-binding bids”. He said his management team was not considering breaking up Thames at present; that would be a distraction from sorting out the fundamentals.
Weston added that Thames needs £3.3bn of new equity plus new debt in AMP8, and called for the imminent PR24 final determination to recognise this need – or “neither Thames Water nor the sector” will be able to attract the investment it requires.
He called on Ofwat to provide an appropriate risk/reward balance; “realistic and achievable” performance and efficiency targets; and for an overall regulatory settlement that “recognises the reality and individuality of our business”.
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