Southern Water Has Sold £675 Million of Debt
(Bloomberg) -- Southern Water sold £675 million ($886 million) of bonds on Wednesday, as the UK utility faces pressure over sewage spills and high debt levels.
The firm raised £375 million of five-year notes at 5.75% and £300 million eight-year notes at 6.125%, both at 202 basis points over gilts, according to a person familiar with the matter.
The deal was managed by Barclays Plc, Rabo Securities, and SMBC and saw £2.95 billion of investor orders for the two tranches.
At the same time, the company announced a tender offer for £350 million of Sub-Class A4 notes that mature in March 2026 at a purchase price of 100.5. It will conclude on November 19, according to a statement.
A spokesperson for Southern Water said in an emailed statement that the sale is part of the normal borrowing program and will extend its liquidity window as the firm is embarking on its biggest-ever five-year investment program.
Southern Water in October closed a debt agreement with its creditors, which entails owner Macquarie injecting £655 million of equity in the business and a restructuring of the liabilities sitting above the operating level. The sponsor has also confirmed its intention to provide further commitments of up to £545 million.
That’s provided some relief for the utility firm, with S&P Global Ratings removing it from the list for a potential downgrade to junk.
Bond Sale
Southern Water, as the broader UK water sector, has been under pressure on continued public outrage about chronic sewage spills into waterways that harm the environment.
The largest operator Thames Water is also currently undergoing debt restructuring talks, which could see its creditors take over the business.
The company last issued debt in July, where it received demand five times the deal’s size.
At the time, the debt had been marketed to a wide range of investors, including more opportunistic funds, said people familiar with the matter, who spoke on the condition of anonymity. However, at the time of the allocation, investment-grade buyers were given the priority, the people said.
Issuer Profile
Debt distribution: 174746Z LN Equity DDIS
Capital structure: 174746Z LN Equity CAST
Related securities: 174746Z LN Equity RELS
Ratings history: 174746Z LN Equity CRPR
(Corrects deal size in headline)
©2025 Bloomberg L.P.
