Thames Water lenders propose new rescue deal to prevent collapse

A group of Thames Water lenders has put forward a new rescue deal for the struggling supplier pledging an extra £1 billion in investment, and plans to write off more than a quarter of the firm’s near-£20 billion debt pile.

London & Valley Water – a consortium of the supplier’s main creditors, including investors and financial institutions – said its offer was “more ambitious, delivers greater value for customers and follows three months of discussion with and feedback from Ofwat” to help turn around Thames Water.

The group said its extra £1 billion of investment, on top of the proposal submitted in May, would “ensure long-term financial resilience” and cover existing fines Thames Water must pay for regulatory and pollution failures.

The group outlined plans to eventually float Thames Water on the stock market, but vowed not to sell the company before March 31 2030 to ensure a focus on the turnaround.

Thames Water – Britain’s biggest water supplier with 16 million customers and 8,000 employees – is on the brink of nationalisation as it struggles under a mountain of debts.

The creditors are looking to secure backing for their plans to avoid the company being put into a temporary special administration regime (SAR), which would effectively wipe out their investments.

The creditors are the bondholders who now effectively own Thames Water after the High Court approved a financial restructuring earlier this year through a loan of up to £3 billion to ensure it can keep running until the summer of 2026.

The firms involved, which include US and UK investment companies such as Elliott Management and US private capital firm Apollo Global Management, submitted their improved bid plans to regulator Ofwat on Wednesday.

Mike McTighe has been named proposed chairman of Thames Water should the bid be accepted, with five directors earmarked to join the board.

Mr McTighe said: “There is a huge amount of work to be done to turn around Thames Water and deliver the improved service and environmental outcomes that customers and local communities deserve.

“From day one, we will inject billions in new investment, strengthen Thames Water’s balance sheet, transform the company for thousands of hard-working frontline staff and begin the delivery of an operational turnaround that puts 16 million customers and the environment first.

“Together with committed and experienced new investors, the collective focus of the new board under London & Valley Water’s plan will be on fixing the foundations, reducing pollution and rebuilding public trust so that by the end of this decade Thames Water can once again be a reliable, resilient, and responsible company.”

Ofwat is now reviewing the latest proposal, with London & Valley Water hoping to secure approval for its deal this autumn.

The group cautioned that a delayed decision would “increase the challenges of delivering the company’s turnaround”.

Chris Weston, chief executive of Thames Water, said: “Today is an important milestone in our ongoing work with creditors and stakeholders to secure a market-led recapitalisation that establishes the financial and regulatory foundations required to support the investment and performance improvements our customers expect.”

The consortium said they would pump in £3.15 billion of new equity into Thames Water and are committed to providing £2.25 billion in new debt.

They have offered to write off around £4 billion, or 25%, of the debt they hold in the group, plus about £1 billion of the debt held by so-called class B bondholders, as well as a further £2.5 billion of debts amassed by Thames Water’s holding company.

“The successful delivery of this plan, if adopted, will avoid special administration, giving immediate confidence to employees, customers, suppliers, regulators, the Government and investors in the UK more generally that the risk of Thames Water’s turnaround will not fall to the UK taxpayer,” according to the bidders.

The creditors submitted an initial financial plan earlier this year to overhaul £17 billion of Thames Water’s debts, including investing another £3 billion in new equity and a further £2 billion of funding.

But they also asked for leniency on performance targets and compliance, warning that a “regulatory reset” was needed for the utility, or its performance would likely worsen.

Thames Water’s current management has previously said it would need over £24 billion of investment allowance for the next five years and to increase bills by more than Ofwat had agreed.

A previous proposed rescue deal with US private equity giant KKR collapsed in May, leading to fears of an impending temporary renationalisation, but the Government has stressed its preference is for a “market-based solution”.