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Thames Water is seeking High Court approval today for a £3bn emergency loan to keep the troubled utility afloat, in a crucial 48-hours for the company and the industry.
At a hearing at the Royal Courts of Justice before Mr Justice Trower on Tuesday, Thames will present the loan as the first stage of a restructuring plan it says is necessary to avoid running out of cash in the spring.
Two days later on Thursday, regulator Ofwat will reveal its “final determination” on water company five-year business plans and how much they will be permitted to increase consumer bills and what return they can offer investors.
It is a crucial moment not just for Thames but for the entire privatised water system, with companies facing increased borrowing costs and pressure to address sewage outflows, climate change and population growth.
Under the restructuring plan, Thames Water’s A-class bondholders will provide a £3bn loan over two and a half years at a rate of 9.75%. The loan would have “super-senior” status, putting it at the front of the queue of the company’s creditors in the event of a default.
The class A bondholders are thought to control up to £12bn of the almost £17bn of net debt at the regulated company level.
Court approval is required as the terms of the loan effectively breach Thames Water’s agreements with its existing creditors by pushing their claims lower down the list of seniority.
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