(Oct 25): Thames Water Utilities Ltd unveiled a proposal on Friday that seeks to raise up to £3 billion (US$3.9 billion or RM16.88 billion) from its creditors to buy it more time to avoid going into special administration early next year.

The UK’s largest water and sewage provider said it wants an agreement to borrow more money and extend existing debt that is due to mature next year. It also wants to access cash reserves to avoid running out of operating capital by the end of December.

Without a restructuring and new funds, the heavily indebted utility would likely be temporarily nationalised. Existing investors want to avoid that because a prolonged period under government control could mean they recover less of the money they lent.

Under the proposal, Thames is seeking to obtain up to £3 billion in super senior funding, made up of an initial tranche of £1.5 billion. Its liquidity would be extended to October 2025.

The beleaguered utility said the plan has the backing of creditors representing about £6.7 billion of its £15 billion debt pile. Most of those are holders of its more senior-ranked, Class A debt.

“Today’s news demonstrates further progress to put Thames Water onto a more stable financial footing as we seek a long-term solution to our financial resilience,” said Thames chief executive Chris Weston.

Time is not on Thames’s side. It’s waiting for a key decision from regulator Ofwat on the industry’s price controls for the next five years, including the rate of return for investors. That decision is due on Dec 19 but could be pushed into January because this year’s UK election delayed the process.

Under the proposal put forward on Friday, Thames could further extend the maturities of some existing debt to May 2026 if it decides to make an appeal to the Competition Markets Authority against Ofwat’s final determination. It could also access a further £1.5 billion across two tranches of £750 million in those circumstances, the statement said.

Rival plan

While the agreement has the backing of Class A creditors, a separate group of creditors that holds Thames Water’s riskiest debt have drawn up different plans to provide Thames with a loan of least £1.5 billion (US$1.9 billion), Bloomberg reported on Thursday.

Friday’s proposal by Thames was welcomed by Ofwat which said it is a “positive step towards extending its liquidity runway and seeking a market-based solution to the company’s problems”.

They added that “safeguards are in place to ensure that services to customers are protected, regardless of the issues faced by Thames Water.

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