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Like an emptying bath, Thames Water’s downward spiral is accelerating as it gets closer to the plughole.
The last week has seen a flurry of developments in the saga of Britain’s biggest water company, the outcome of which matters not just to its customers and investors, but the UK’s credibility as a haven for overseas investment.
The trigger was Thames‘ warning a week ago that it could run out of cash by Christmas, fully five months earlier than previously warned, unless it can persuade its creditors to allow it to access £380m in undrawn reserves.
If it fails, the company would enter a “standstill”, allowing it to access the £380m as well as a further £550m, but not able to commit to any expenditure beyond day-to-day operations.
That prompted a further downgrade this week of the company’s credit rating with international agencies whose judgements guide investors on the health of debt markets.
They now view the company as highly risky and prone to default, and take a “negative” view of its management.
Thames Water insists it was clear about the need to access reserves, and says it is “engaging” with creditors, while beginning a search for fresh equity investors willing to fill the £3.25bn hole left by existing shareholders who no longer are.
Earlier this month, chief executive Chris Weston told Sky News he could save the company, but the uncomfortable truth is that its fate may now be out of the existing management’s hands.
‘High-wire, high-stakes plan’
A group of creditors – 90 institutions who collectively hold £10bn of Thames’ almost £16bn debt pile – are working on their own plan…
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