Thames water lenders offer $4.4 billion in new equity to rescue utility

Lenders to UK's Thames Water offer $4.4 billion investment in latest rescue bid

Thames Water Rescue Proposal and Financial Challenges

LONDON, March 16 (Reuters) - A group of Thames Water's creditors have offered 3.35 billion pounds ($4.4 billion) of new equity and up to 6.55 billion pounds of new debt as part of their latest bid to rescue Britain's biggest water company.

Thames Water, which is at the centre of a sewage scandal in Britain, could be nationalised if regulators fail to agree a deal with the group of senior creditors, which includes Invesco, Elliott Management and Silver Point Capital.

Details of the Latest Rescue Proposal

Monday's proposal - part of the creditors' latest offer called London & Valley Water - increases the pledged investment compared to a 3.15 billion pound equity proposal made in October last year.

Proposal Terms and Stakeholder Involvement

"The L&VW proposal is non-binding and remains subject to ongoing review by the company, Ofwat and other regulators, and subject to discussion with the company’s financial stakeholders," Thames Water said in a statement.

Background: Thames Water's Financial Struggles

Debt Burden and Regulatory Constraints

DEBT-CRIPPLED THAMES WATER STRUGGLING SINCE 2023

Thames Water, which serves 16 million customers, has been fending off financial collapse since 2023 as it grapples with nearly 20 billion pounds of debt in a sector where the regulator limits price increases.

Turnaround Plan and Lender Commitments

The statement said the higher equity investment represented the capital required to deliver a turnaround of the company over the next four years. It said the group of lenders has also committed to paying no dividend during the turnaround process or until the company is listed and pledged not to sell Thames Water before 2030.

Recapitalisation and Debt Write-Offs

The proposal would also see the recapitalisation of Thames Water's balance sheet through a 30% write-off of Class A debt and a full write-off of lower ranked debt, helping reduce the company's leverage and return it to an investment-grade credit rating.

"Discussions with financial stakeholders in relation to the terms of the recapitalisation are expected to take place in the coming weeks," the statement added.

Regulatory Discussions and Potential Outcomes

Pollution Fines and Performance Targets

The talks with the regulator also cover the payment of fines Thames Water could face over sewage pollution and what performance targets it would need to meet during the turnaround period, the statement said.

Risk of Nationalisation

Without an agreement between the regulators and the creditors, Thames Water is likely to end up in the government's special administration regime, a form of temporary nationalisation.

Additional Information

($1 = 0.7552 pounds)

(Reporting by Sarah Young in London, Prerna Bedi in Bengaluru; Editing by Sumana Nandy and Joe Bavier)