By Sarah Young
LONDON (Reuters) -Thames Water, Britain’s biggest water supplier, said on Monday its 3 billion pound ($3.9 billion) debt lifeline would go ahead after appeals against it were dismissed, allowing the company to avoid a state rescue in the short term.
Thames Water faced two appeals after it secured court approval for the new loan in February but they were both refused by the Court of Appeal on Monday, in a sealed order which said the reasons would be given in a judgment in “due course”.
The appeals had been made by a group of junior creditors, which argued the rescue favoured senior creditors, and a public interest group focused on the environment and value for money for taxpayers, headed by lawmaker Charlie Maynard. Both groups believed the 9.75% interest rate attached to the new debt made it too expensive for Thames.
The appellants could still apply to take the matter to the Supreme Court and the junior creditor group responded to Monday’s ruling that it would continue to explore all available avenues.
Thames Water said it was launching a waiver to enable it to access the first tranche of its lifeline while the possibility of an appeal remained.
The company is at the centre of a public backlash against Britain’s water industry. Its mismanagement is blamed for sewage pollution in rivers, and for an 18 billion pound debt pile which has left the company on the brink of financial collapse.
The group’s chief executive said his focus remained on putting the company on a “stable financial foundation”.
While the company has won the current legal battle, it still has challenges to overcome.
The new debt underpins Thames Water’s finances until May 2026, buying it time to restructure its debt and raise new equity. Meanwhile, it is also trying to win the right to charge its customers higher prices for the coming five years, through a competition appeal.
“We continue to work closely with our creditors, enabling us to access liquidity to continue to implement our turnaround plan so we can deliver better results for our customers and the environment while seeking to attract new capital into the business,” CEO Chris Weston said in a statement.
The senior creditors behind the lifeline include Aberdeen, Apollo Global Management, Elliott Investment Management, Invesco, M&G and PIMCO. Reacting to the court statement, they said the new debt would help Thames with its turnaround while new long-term ownership is sought.
“We will now be working with the company to allow it to move forward and access the money it needs to continue to invest in the business and work with stakeholders to complete an equity process this summer,” a spokesman for the creditor group said.
Thames Water said on Monday that its fundraising process was continuing and it was conducting an assessment of each bid. The company said it expected to receive the initial tranche from the first 1.5 billion pound part of the lifeline in the coming months, after satisfying conditions, obtaining waivers amongst other details.
The government has repeatedly said it wants Thames Water to avoid its special administration regime (SAR), a form of temporary nationalisation, and is focused on reforming the privatised water sector to improve its environmental performance.
($1 = 0.7712 pounds)
(Reporting by Sarah Young; Editing by Susan Fenton, Paul Sandle and Tomasz Janowski)
