LONDON (Reuters) – An English court begins a four-day hearing on Monday to decide whether to approve a new debt lifeline worth up to 3 billion pounds ($3.72 billion) allowing Thames Water to stave off nationalisation.
A High Court judge will hear from Britain’s biggest water supplier and groups of rival creditors before deciding whether to approve the rescue. Without it, Thames Water has said it could run out of cash by March.
Under English insolvency law, a judge must rule on such cases.
Thames Water, which has 17 billion pounds worth of debt, is at the centre of a public backlash against Britain’s privatised water industry, which has increasingly polluted rivers and seas with sewage, amid accusations that profit has been prioritised over the environment.
Thames says it is confident its plan will succeed as it has the backing of creditors holding more than 90% of its secured debt, despite opposition from a group of lower-ranked creditors.
Under the proposals, Thames would get access to additional funding, cash reserves and debt extensions, giving it breathing space to secure its survival in the long term by raising 3.25 billion pounds in new equity alongside a debt restructuring.
The lower-ranked creditors say the plan benefits the senior creditors unfairly and that its 9.75% interest rate makes it too costly. They have proposed their own package.
The judge must decide whether the dissenting creditors would be no worse off in the most likely alternative to the plan, which Thames Water says is that the company is placed in special administration – though that is hotly disputed.
CRISIS
Thames was plunged into crisis last year when its owners refused to stump up new cash, calling the utility “uninvestible” and putting the government on standby to nationalise it.
The company faces a further challenge over the price it is permitted to charge its 16 million customers for the coming five-year period. The regulator has said it can hike bills by 35% over that time, lower than the 53% rise it says it needs.
Thames Water has until Feb. 18 to launch an appeal against the regulator’s decision.
Water companies, which have been fined millions of pounds for sewage spills, have told the regulator they need to be able to charge higher prices to raise their returns or they will struggle to secure investment in infrastructure to make the environmental improvements.
($1 = 0.8054 pounds)
(Reporting by UK bureau; Editing by Gareth Jones)
