Thames Water Needs £10 Billion Under Elliott, Silver Point Plan
(Bloomberg) -- Funds including Silver Point Capital and Elliott Management are working on a rescue plan for British utility Thames Water that would total more than £10 billion ($13.5 billion), according to people familiar with the matter.
The proposal, the main terms of which are similar to the one presented by US alternative investor KKR & Co. before it walked away from its planned investment this week, would involve a sweeping debt restructuring. There would be a multibillion pound haircut for senior creditors, the people said. That would be on top of cuts for the utility’s more junior Class B bonds and loans, as well as for debt at the holding level, amounting to approximately £3 billion.
The package would also include an equity injection of between £3 billion and £4 billion to stabilize the company’s finances. The specific terms of the plan are still being finalized.
A spokesperson for the senior creditor group, which includes Silver Point and Elliott, confirmed that it has submitted a detailed long-term turnaround proposal for the company to “restore its balance sheet, rebuild customer trust and fix the fundamentals of the business.” A spokesperson for Thames Water declined to comment.
Thames Water is in a race against time to fix its finances. Britain’s largest water and sewage utility is already eating into an emergency loan that it was granted by senior creditors to prevent its cash from drying up, and is scrambling to find fresh equity. The company needs to find a turnaround plan that will reduce its debt pile of nearly £20 billion.
Previous shareholders called the company uninvestible, writing off their stakes and leaving it to the creditors. The utility, which supplies about a quarter of the UK’s population, came close to running out of money several times before obtaining the emergency loan.
The details of the latest proposal, which aims to return the company to investment-grade status, are emerging after Thames Water confirmed it’s working with its senior creditors to recapitalize and restore its finances. Regulator Ofwat will need to discuss the details with the creditor group in the coming weeks. The creditors said in a statement this week that the plan is fully-funded.
Should the process of raising equity fail, Thames could fall into a special administration regime, or SAR, a temporary state-supervised process akin to insolvency designed for bankrupt businesses that provide critical services.
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