LONDON (Reuters) – Thames Water, Britain’s biggest water supplier, will find out from a court this week whether a 3 billion pound ($3.88 billion) debt lifeline can proceed, as its battle to avoid a state rescue continues.
The company is at the centre of a public backlash against the UK water industry. Mismanagement of Thames Water is blamed for sewage pollution in rivers, and for an 18 billion pound debt pile which has left it on the brink of financial collapse.
It secured court approval for the new 3 billion pound loan in February, giving it two years to get its finances back in order, but there were appeals from a group of junior creditors and public interest group headed by lawmaker Charlie Maynard.
The Court of Appeal will announce its decision this week following a three-day hearing on March 11-13.
Following the outcome of the appeal, any of the parties could apply to take the matter to the Supreme Court, leading to worries that Thames Water could run out of money as the process rumbles on.
Even if the legal battle is eventually settled in favour of the loan, Thames Water’s future as a privately held entity is far from guaranteed.
The new debt underpins its finances until May 2026, by which time it needs to restructure its debt and raise new equity. Meanwhile it is also trying to win the right to charge its customers higher prices for the coming five years, through a competition appeal.
The government has repeatedly said it wants Thames Water to avoid its special administration regime (SAR), a form of temporary nationalisation, and is focused on reforming the privatised water sector to improve its environmental performance.
During the appeal process, Thames Water said the debt plan remained its best option, and would not financially affect taxpayers or customers.
The two groups behind the appeal object to the high cost of the new loans and want Thames Water to be put into the government’s SAR, which would keep water services operating before the company is eventually sold.
The senior creditors behind the lifeline include Aberdeen, Apollo Global Management, Elliott Investment Management, Invesco, M&G and PIMCO.
($1 = 0.7730 pounds)
(Reporting by Sarah Young; Editing by Susan Fenton)
