Emergency funding that would allow Thames Water access to as much as £3 billion and stave off temporary nationalization is being challenged at a London court this week.
The cash-strapped firm had a rescue deal approved last month, but junior creditors and a UK politician have appealed that ruling. With it’s future hanging in the balance Thames is making preparations to enter special administration, a form of government-managed insolvency, in the event that a panel of three judges overturns the decision.
The junior creditors will argue that the terms of the loan proposed by a group of senior creditors — including Elliot Management, Silver Point and Pimco — are unfair and too expensive. While Liberal Democrat Charlie Maynard will say that the best option for consumers is to nationalize the utility.
The restructuring deal allows Thames, which supplies water and sewage services to nearly a quarter of the country, to borrow as much as £3 billion in order to keep the firm from running out of cash. However, the rescue financing would be little more than a stopgap for the company, as it’ll almost certainly need to agree a more comprehensive restructuring at a later date.
Thames has long been weighed down by its debt burden, which has already seen its owners write off the values of their stakes’ to zero. Beyond its financial woes, the company has come under criticism for its poor environmental record, which has seen Thames handed hefty fines from regulator Ofwat. While the utility works to deal more than £16 billion of debt, another process is underway to find a new owner for the beleaguered firm.
The success of a more comprehensive restructuring plan will also depend on whether Thames can find someone to provide an equity investment into the company alongside the recapitalization. Rothschild & Co has been hired to help run the bidding for the company.
Despite approving the loan last month Judge Thomas Leech described the costs as “eye-watering. The loan carries a 9.75% annual interest rate and could cost more than £800 million in interest and fees over six months.
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