Thames Water has won support from three-quarters of its creditors for an emergency funding deal which would throw the struggling utility company a £3 billion lifeline.
The firm said on Wednesday that creditors holding more than 75% of its Class A debt – the least risky class of bonds in its debt pile – have agreed to the deal.
A cluster of investment giants including BlackRock, Abrdn and M&G drew up the funding plan, which, if approved, effectively guarantees Thames Water can keep operating until October 2025.
But the 75% threshold is significant because it is the minimum amount needed for legal approval.
Thames Water still needs it to be passed in court though, and is aiming for a December 17 hearing.
The company said in a statement that reaching the three-quarters mark represents “an important milestone in implementing” the funding deal.
The plan would see Thames Water initially get a £1.5 billion loan, which comes with an annual interest rate of 9.75% plus fees.
There would be capacity for a further £1.5 billion, across two tranches of £750 million, if the company appeals to competition regulators over planned bill increases across the water sector.
Water watchdog Ofwat is expected to confirm in December how much it will allow water companies to increase their bills by over the next five years.
Securing the second cash boost of £1.5 billion would fund the company until May 2026.
It comes amid a growing dispute against a secondary group of creditors who also hold a portion of Thames Water’s debt – thought to be about £1 billion of riskier, Class B bonds.
The Class B bondholders drew up a rival fundraising plan in October, which they say is less expensive than the interest rate put forward by the Class A group, but it was not endorsed by the utility company.
Thames Water has been at the centre of growing public outrage over the extent of pollution, rising bills, high dividends, and executive pay and bonuses at the UK’s privatised water firms.
The company, which is the UK’s largest water provider, is more than £16 billion in debt, while also facing a crisis caused by long-term lack of investment in its infrastructure.
The group of Class A creditors which drew up the emergency funding plan is made up of more than 100 global investment firms.
It also includes the US hedge fund Elliott Investment Management, plus investment firms Apollo Global Management and Silver Point Capital.
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here