Thames Water was handed a £3 billion lifeline today after the High Court approved its plans for an emergency restructuring. In a lengthy ruling Mr Justice Leech said the stricken utility could press ahead with the scheme, which will save it from imminent financial collapse next month. The plan will provide £1.5 billion of immediate life saving funding, with a further £1.5 billion potentially available on a 9.75% interest rate.
The judge described the enormous fees, interest and other costs of the restructuring scheme as “eye-watering” adding “Customers and residents who are struggling with their bills will be horrified at these costs and mystified how the Thames Water Group has been able to fund them or why it has agreed to do so.”. It has already been approved by creditors holding more than 75% of its Class A debt, which is worth about £11.5 billion and is the least risky class of bonds in its debt pile.
An initial tranche of £1.5 billion will give Thames Water enough money to survive until September. The company is around £16 billion in debt and has warned it will run out of cash by March 24, when it has to repay £224 million to bondholders, without an emergency injection of funds. It can access a further £1.5 billion in two tranches of £750 million, to give it sufficient financing until May 2026 if required. That will depend on the outcome of Thames’s appeal to the Competition and Markets Authority over how much it can put up bills over the next five years.
The funding will be released to Thames Water on a monthly, or on an interim basis. The transaction will also see maturities of all Class A Debt and Class B Debt extended by two years. Currently between 19 June 2025 and 18 April 2027 seven notes or bonds mature totalling requiring repayment of more than £3.5 billion. Thames Water chairman Sir Adrian Montague said: "The Court's approval of the company plan marks a significant milestone for Thames Water, enabling us to proceed with the implementation of the Liquidity Extension Transaction.
“Its implementation is a key step in strengthening our long-term financial resilience and will allow us to continue progressing the equity raise process and a holistic recapitalisation transaction as well as complete the CMA appeal process in respect of Ofwat's PR24 price review. Critically, it enables the management team to continue progressing the turnaround.". CEO Chris Weston said: "We are pleased the Court sanctioned the Company Plan. This is good news for our customers, puts our business on a firmer financial footing and enables us to continue to invest in our network and deliver critical infrastructure upgrades for our customers and the environment. Importantly, this decision will support the delivery of our turnaround which is underway.".
