A group of junior bondholders at British Thames Water has challenged the proposed £3bn emergency loan from senior creditors, alleging predatory conditions and an attempt to circumvent regulatory oversight. The bondholders are seeking court approval for their own rival plan, raising concerns about the company’s financial stability and the potential for nationalization. The claims by a group of Thames Water ’s so-called class B bondholders came on Tuesday as it formally filed paperwork to seek court approval for its own rival loan proposal.
Thames Water, which is the UK’s largest water utility serving customers in and around London, is trying to win court approval for the controversial £3bn loan agreed with its top-ranking creditors. Thames Water faces the prospect of running out of cash in March if it cannot raise new financing, which would likely lead to the utility being temporarily renationalised under the government’s special administration regime. The junior bondholders said in a summary of their grounds of objection to the proposed loan filed with the court
“The company’s proposed plan looks to sidestep Ofwat’s approval, undermining proper regulatory procedures critical for a national utility with 16mn customers.”
Thames Water’s rival classes of bondholders took aim at one another in a London high court hearing last month, during which the class B bondholders indicated that they would challenge proceedings and launch their own parallel restructuring plan for the company. The class B bondholders announced on Tuesday that they had also formally filed “grounds of objection” to Thames Water’s proposal earlier this month. Beyond the “excessive” costs of the class A loan, the lower-ranking bondholders said they had also objected to “predatory conditions” on the debt that could hamper the company’s ability to raise equity; and the fact that Thames Water’s proposal was based on “flawed evidence”, as it did not incorporate the impact of a five-year price review agreed with water regulator Ofwat last month over how much utilities could raise customer bills.
Sources: Reuters and Financial Times (paywall) – summarized by Head Topics