Thames Water Rejects Peer's Last-Ditch Offer to Fix its Finances
Lord Rupert Redesdale, the former Liberal Democrat energy spokesman, has been working on a potential offer for the company from investment firm Muinín Holdings, the Financial Times reported earlier Thursday. The proposal envisages the issuance of new bonds from an investment vehicle to help stabilize the utility's finances in the short-term, while the existing debt would be shifted outside the regulated entity and into a new structure.
Crucially, however, the proposal did not include an equity injection and the debt transfer could trigger significant writedowns.
'We have received a further bid which has little credibility or viability to recapitalize the business,' a Thames Water spokesperson said, in response to a question about the proposal. 'We continue to believe that a sustainable recapitalization of the company is in the best interests of all stakeholders and continue to work with our creditors and stakeholders to achieve that goal.'
Muinín and Redesdale didn't immediately respond to a Bloomberg News request for comment.
Britain's biggest water and sewage company decided to progress with the current bid after creditors — including the likes of Apollo Global Management, Elliott Management and Silver Point Capital — wrote to the company's board to say that the new proposal is unworkable, according to people familiar with the matter, asking not to be identified discussing confidential information.
The creditor group now holds significant sway over Thames Water's future, having become its economic owners after previous shareholders walked away last year, deeming the business uninvestable.
The emergence of new approaches to rescue the company from nationalization comes as the company forges ahead with negotiations with water regulator Ofwat and the creditors to approve a rescue plan that includes £5 billion ($6.8 billion) of fresh funds.
Discussions on the way forward to restructure nearly £20 billion in debt and raise fresh equity, however, have been fraught. The government has rejected calls from creditors for special treatment on sewage fines, setting the stage for a showdown which could end with the company placed into special administration — a form of temporary nationalization.
'Ofwat has been engaging regularly with Thames Water as it has progressed its process to raise additional equity,' a spokesperson for the regulator said. 'Our focus is on ensuring that the company takes the right steps to deliver a turnaround in its operational performance and strengthen its financial resilience to the benefit of customers.'
Redesdale told the Financial Times that their proposed bid will not require any exemptions from meeting regulator requirements or immunity from prosecution, which made it politically appealing, according to a separate person.
Thames has suffered a calamitous few years, facing not only severe financial strain but broad criticism for its poor environmental record, which has landed it with hefty fines. The utility came close to running out of money several times before it started drawing on an emergency loan from creditors in March.
As the company sank deeper into financial stress, US private equity giant KKR & Co. was picked as preferred bidder to invest in Thames earlier this year, but subsequently walked away. The utility has since received interest from potential investors including Castle Water and CK Infrastructure Holdings, but 'there is not a progressable proposal' from them, Thames Chairman Adrian Montague wrote in a letter to Parliament's Environment, Food and Rural Affairs Committee published Wednesday.
The chairman also mentioned other alternative approaches, one from an entity called Titanium SPV and another from 'an individual connected with the water industry with an outline plan to recapitalize Thames Water by tokenization of debt,' which the FT said it was Redesdale's initial proposal.
More stories like this are available on bloomberg.com
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