Thames Water’s junior bondholders have accused the troubled utility’s senior creditors of attaching “predatory” conditions to a £3bn emergency loan, which they claim is an attempt to “sidestep” regulatory oversight.
The claims by a group of Thames Water’s so-called class B bondholders came on Tuesday as it formally filed paperwork to seek court approval for its own rival loan proposal.
Thames Water, which is the UK’s largest water utility serving customers in and around London, is trying to win court approval for the controversial £3bn loan agreed with its top-ranking creditors. Thames Water faces the prospect of running out of cash in March if it cannot raise new financing, which would likely lead to the utility being temporarily renationalised under the government’s special administration regime.
“The company’s proposed plan looks to sidestep Ofwat’s approval, undermining proper regulatory procedures critical for a national utility with 16mn customers,” said the junior bondholders in a summary of their grounds of objection to the proposed loan filed with the court.
Thames Water’s rival classes of bondholders took aim at one another in a London high court hearing last month, during which the class B bondholders indicated that they would challenge proceedings and launch their own parallel restructuring plan for the company.
The class B bondholders announced on Tuesday that they had also formally filed “grounds of objection” to Thames Water’s proposal earlier this month.
Beyond the “excessive” costs of the class A loan, the lower ranking bondholders said they had also objected to “predatory conditions” on the debt that could hamper the company’s ability to raise equity; and the fact that Thames Water’s proposal was based on “flawed evidence”, as it did not incorporate the impact of a five-year price review agreed with water regulator Ofwat last month over how much utilities could raise customer bills by.
“We strongly oppose the attempts by Thames Water’s management to rely on outdated evidence to push through the courts an overly costly new loan that would unfairly grant creditors control over a critical utility and circumvent regulatory oversight, in particular without having run any competitive process to obtain better terms which are clearly available to it,” said a spokesperson for the class B creditors.
Thames Water said in a statement to the market on Tuesday: “The board and leadership team remain focused on implementing the company plan, stabilising the business and seeking the best financial and operational outcome for customers, the environment, UK taxpayers and the UK economy.”
Ofwat said it noted the class B bondholder’s alternative plan and it was “for the company to lead and manage this process in a way that meets its regulatory obligations.”
The class A bondholder group declined to comment. A barrister representing the class A creditors said in court last month that the class B lenders’ arguments that their loan would have a chilling effect on Thames Water’s ability to raise equity seemed “implausible”.
