Thames Water says taxpayers will have to bail it out if they don't get a £3bn rescue loan
Taxpayers will have to bail out struggling Thames Water if an ‘urgent’ £3billion rescue loan is blocked, the utility said at a court hearing yesterday.
In a legal showdown with creditors, Britain’s biggest water supplier said it will run out of cash in March next year and tip into insolvency unless the deal gets the green light.
The struggling firm moved one step closer to securing the loan after a judge approved a further court date to go ahead early next year.
It is one of several hurdles the company must clear to avoid nationalisation, and the hearing came just days before a crunch decision by the water regulator.
Ofwat is due to rule tomorrow on how much Thames Water can raise customer bills by over the next five years – a decision that is pivotal to the utility’s restructuring plans.
The debt-laden company wants to charge its 16m customers in London and the southeast 59 per cent more by 2029 to pay for infrastructure upgrades.
Debt burden: Thames Water said it will run out of cash in March next year and tip into insolvency unless the deal gets the green light
If Ofwat rules against the firm, it could derail its plans to find a buyer for the business as it seeks a separate £3billion cash injection.
Thames Water’s legal team yesterday said that without an urgent loan, the Government would be forced to step in to run the firm in a process known as the special administration regime.
Some 75 per cent of top-ranking creditors including investment giants BlackRock, Abrdn and M&G, have agreed to the loan with an interest rate of 9.75 per cent.
It would have a ‘super-senior’ status, meaning it would be at the front of the queue for repayment if the company went bust.
And the deal would also see payment dates for its debts extended by two years.
The loan would allow the firm to survive until 2026 while management carries out a longer-term restructuring plan, a Thames Water spokesman said.
But a group of smaller bondholders have argued that Thames Water’s plan is not in the best interests of the firm.
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They have put forward alternative proposals, which the company has said are not feasible.
Meanwhile, campaigners gathered outside the court calling for the plan to be blocked, saying the debt will add an extra £250 a year to customer bills.
Yesterday’s hearing was the first in a two-stage process to agree the loan. A High Court judge will decide in February whether to approve the company’s preferred plan.
Court approval is required as the terms of the loan effectively breach Thames Water’s agreements with its existing lenders by pushing their claims lower down the list of seniority.
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