A consortium of Thames Water's lenders has put forward a £10bn rescue plan that would involve paying off hundreds of millions of pounds in fines for leaks and pollution, in an effort to prevent the company from falling into government-handled administration.
The group, which includes US hedge funds Elliott Management and Silver Point Capital, said it would inject about £3.35bn of cash into the company and raise £6.65bn in debt. In exchange, Thames Water would remain in private hands rather than being temporarily nationalised.
Thames Water, which serves 16 million customers in south-east England, has been on the brink of collapse for over two years under £17.6bn of debt built up since privatisation. Its environmental performance has also drawn widespread criticism, with sewage leaks prompting public outrage and hefty fines.
Under the proposal, all existing fines would be paid in full, and an upfront payment would cover future underperformance against Ofwat's targets. However, the company would still be subject to future penalties. Around 30% of senior creditors' debts would be wiped out, while junior 'class B' creditors would lose their entire investment.
The plan also includes a ban on dividend payments until at least 2035, and customers would receive a share of proceeds if Thames Water is later sold at a significant profit. The consortium, known as London & Valley Water, said the plan would establish 'a route back to full compliance as quickly as possible' and provide 'clear accountability' for reducing sewage spills.
The proposal requires approval from Ofwat, the company's board, Environment Secretary Emma Reynolds, and other regulators. Thames Water cautioned that there was 'no certainty' the plan would be accepted, as previous rescue attempts have collapsed.
