Plans to inject £1billion into Thames Water before the end of the year will provide a lifeline as it works to stabilise its finances.
Hedge funds and institutional investors holding approximately £10billion of the water company’s debt believe the firm requires an interim cash injection to maintain operations and prepare for a comprehensive restructuring.
However, insiders suggest this may not be finalised until the end of June next year.
According to Thames Water, there is only enough money to last until May.
It is understood that the finance is most likely to be loans or bonds with “super senior status”.
Sources would also charge Thames Water a high rate of interest on these loans.
Thames Water has struggled to cope with a £16.5billion debt as sources say the company is “distressed”.
Any interim funding is expected to take two to three months to secure.
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The company was promised an injection of equity from its owners – including Canadian pension funds and the British university pension scheme USS – earlier this year.
Thames Water was expecting funds in tranches of £500million and £750million respectively.
Investors announced in March that the money had not arrived.
A potential cash injection – by creditors including Elliott and BlackRoc – could fill the £1.25billion gap.
The company is staring down billions in debtPA
Thames believes it requires around £3.3billion over a long-term period to bring the company back on firmer footing.
Critics claim that no new investors will join the water firm until the industry regulator, Ofwat, has published its final determination on how much Thames can bill its customers over the next five years.
If Thames Water fails to find finance, it will fall into special administration.