Thames fields alternative emergency funding offers
On 7 November, Thames Water’s B class bondholders made a £3bn emergency debt offer to the company’s board. This is an alternative proposal to the initial offer for the same amount made by the A class creditors.
The class B group have offered an 8% cost of debt, which is lower than the 9.75% offered by the A class creditor group and, they said, it is on more flexible terms.
According to press reports, there may even be another proposal in the wings from the lenders of derivatives to Thames with swap liabilities valued at around £1.3bn in March. These banks have hired advisors at Simpson Thatcher & Bartlett LLP to form a creditor group that will negotiate with Thames separately.
The new loan offer from the class B group would need approval from the class A bondholders. Both offers rank ahead of the A class debt. The class B group said it was asking “all of the company’s other creditors to support this committed financing on that basis, rather than needlessly paying lenders interest on expensive debt with money that could be spent investing in the water and wastewater supplies of London and the Thames Valley”.
Even though the A class term proposals and term sheet are now published on the Thames Water website and have been approved by the company in principle, the Thames board will be under pressure to accept the most competitively-priced financial package.
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