Thames Water’s lenders are reportedly preparing to plough more than £1bn of emergency funding into the embattled utility before the end of 2024 to keep it out of government hands.
A group of hedge funds and other financial institutions that hold roughly £10bn of Thames’ debt believe it needs a stop-gap cash injection.
The cash would help stabilise the company and act as a precursor to a sweeping restructuring, which may not be completed until June 2025, according to The Sunday Times.
The finance is reportedly most likely to come as loans or bonds with “super senior status”, putting the lenders first in line for repayment if the firm failed and potentially giving them more say in any restructuring.
These loans would likely have a high rate of interest considering the company’s “distressed” debt status.
The interim funding is reportedly expected to take two or three months to secure.
Thames’, the UK’s largest water firm with around 15m customers, announced on Friday that it was seeking fresh repayment terms and confirmed it had only about £1.6bn of funds left.
However, it cannot access all of this cash without the explicit consent of its lenders, which are owed about £15bn.
Should they refuse, Thames has said it would run out of available cash by the end of December. If it does, the company would enter a “standstill” period, where creditors cannot come after it, and be granted access to a £550m loan and a separate £380m facility.
Thames has reportedly lined up court dates in November that could allow additional funding with approval from just 75 per cent of creditors, rather than the usual 100 per cent.
Potential new investors are likely to be wary of Thames until regulator Ofwat has published its final determination on how much the firm can charge customers over the next five years, due to be published in December.
If Thames runs out of money, it may be placed in a form of temporary nationalisation known as special administration, where its services for consumers are maintained while an administrator would try to find new investors and restructure its debt.
According to the Telegraph, this scenario could cost the taxpayer £10bn over five years.
Thames Water declined to comment.