Thames seeks new financing lifeline as recapitalisation negotiations drag on

(by Karma Loveday)

Thames Water is seeking an extra £2.4bn from its creditors to extend its liquidity to Autumn 2027.

It said in a stock exchange statement that the £3bn facility previously committed by creditors will only last until the end of this year or early next year (£2.65bn has already been drawn down), but that the company “does not expect to complete its recapitalisation process ahead of this date”. Hence it needs an “upsize,” to be accessed in tranches over the coming months, as recapitalisation negotiations continue.

In a separate development, media reports have suggested that the Government of Canada has warned the UK Government that nationalising Thames Water without compensating investors could jeopardise wider investment in Britain. Canadian pension funds have extensive infrastructure investments here, including in transport, energy and property. The Royal Bank of Canada is a senior creditor to Thames Water.

Meanwhile last week, Thames said that while recapitalisation talks continue, it has agreed terms on how Class B creditors would be treated in a deal. These terms are are supported by Class A creditors and super senior creditors who hold at least 66.66% of the Class A and super senior debt respectively, and consenting Class B Creditors who hold in aggregate in excess of 60% of the Class B Debt.

The recapitalisation continues to contemplate a write-off in full of the £1bn of Class B Debt. In exchange for agreeing to this, Class B creditors will receive:

• Post restructured equity in the Thames Water group of a percentage which gives the Class B creditors a recovery of c.5.9%

• The right to participate in £150m of any new equity contemplated by the recapitalisation.

• 5.9% participation rights in respect of certain additional tiers of new debt or preferred equity which is included in the terms of the recapitalisation.

  
  

The company encouraged other Class B creditors to accede to these terms.