Rival bondholders of Thames Water face a court hearing

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Rival classes of Thames Water bondholders attacked each other at a High Court hearing in London, where Troubled interest She put forward her case for an emergency loan of up to £3bn from major lenders.

Junior bondholders claimed in written documents submitted to the hearing on Tuesday that the company’s senior creditors were “holding Thames Water to ransom” through onerous terms on their “extremely expensive” loan, which they said had a “chilling effect” on interest rates. Attempts to raise capital From new investors.

The court hearing, which Thames Water said was “urgent”, is the first step by the UK’s largest water and wastewater company to seek court approval to borrow up to £3bn from the senior holders of its Series A bonds. Without it, the company, which has a debt pile approaching £19 billion, “will run out of available liquidity on March 24, 2025,” according to court documents.

The loan is part of the company’s attempt to temporarily avoid renationalization under the special management system implemented by the government. Thames Water serves 16 million people in and around London.

The loan proposal has led to He spat increasingly pungently between the company and its lower-rated bondholders, who claim the utility did not properly consider their competing bid for a loan equivalent to £3bn at a cheaper cost and more advantageous terms.

These so-called Series B bondholders are now looking forward to it Appeal procedures And the launch of their own parallel restructuring plan, which lawyers say will be the first time a judge has been asked to consider rival proposals since the new restructuring regime used by Thames Water came into effect in 2020.

Thames Water’s lawyer told the court on Tuesday that the proposed loan “is not in itself a comprehensive solution to Thames Water’s financial difficulties”. Instead, Thames Water is borrowing money to increase its cash until the regulator, Ofwat, sets the amount by which it and other water companies can raise customers’ bills. This decision is scheduled to be made on Thursday.

For their part, major bondholders called their rival group’s proposal “an unworkable distraction to advance their own interests.”

A lawyer representing the Class A creditors told the court that arguments that their loan would have a chilling effect on Thames Water’s planned parallel equity raise “appear implausible”, while he argued that junior bondholders were simply looking to “lengthen the schedule”. timeline” in the procedures in the hope of “improving their position.”

In addition to angering junior bondholders, the senior-lien loan proposal has also attracted criticism from activists, academics and experts, who have criticized the loan’s high interest rate of 9.75 and other fees that could cost utilities. Up to 800 million pounds sterling More than 2.5 years.

A group of activists staged a protest outside the Royal Courts of Justice on Tuesday, calling on Environment Secretary Steve Reid to “stop the High Court from signing off on the Thames Water bailout”.

Windrush Against Sewage Pollution, based in Oxfordshire, also wrote to the court last week asking for evidence to be considered on behalf of Thames Water’s bill payers, which the group argued had “no say” in the proceedings despite being “creditors in waiting”. “.

A judge can approve a restructuring plan if he gets approval from at least 75 percent of each class of creditors — but failing that, he will consider a plan that leaves none of the company’s creditors worse off under what’s called the “relevant alternative.”

The company has argued that the appropriate alternative to its loan is private administration, which its experts’ analysis shows would result in a complete wipeout of Class B bondholders, compared with a nominal recovery of 3.5 per cent in a future restructuring of Thames Water’s debt.

However, Class B bondholders claim there is still “insufficient clarity” on what private management might look like.

The 131-page analysis of Thames Water, prepared by consultants at Teneo, highlights how disastrous a private administration could be for all bondholders, and expects the major group to be able to recover less than half of its money if Thames Water falls into the system without Obtain favorable approval. Dealing with bill increases.