Fitch Cuts Thames Water Parent to Two Steps Above Default

image is BloomburgMedia_SBES9HT1UM0W00_04-04-2024_12-00-08_638477856000000000.jpg

Thames Water Ltd. vans parked at a treatment works in London.

The parent company to the UK’s biggest utility firm saw its bond prices slump deeper into distressed territory after Fitch Ratings cut its rating to two steps above default. 

Fitch downgraded Kemble Water Finance Limited, owner of Thames Water Utilities Limited, to CC, saying that a default is “probable” even if lenders agree to amend and extend a £190 million ($241 million) loan maturing on April 30. Moody’s Ratings lowered Kemble’s senior secured debt rating to Ca, its second lowest level on Wednesday.

Kemble said late last month that it won’t be able to make payments on the loan unless a maturity extension is granted. “It is highly likely” that such an agreement would constitute a distressed debt exchange, which would trigger a so-called restricted default on completion, Fitch analyst Sagar Nadkarni said. 

Prices on Kemble’s only tradeable bond, which matures in 2026, were quoted at around 17.2 cents on Thursday, down from 18.5 cents on Wednesday, according to Bloomberg indicative prices. 

Thames Water is the worst performer among England and Wales’s water and sewage companies and desperately needs cash to improve pipes so it can meet government targets on leaks, pollution and customer service. Shareholders refused last week to inject £500 million into the company, leaving a yawning gap in its finances and raising the prospect that officials would start special administration proceedings, a form of temporary nationalization.

(Adds bond moves, background throughout.)

©2024 Bloomberg L.P.

By Esteban Duarte


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