Thames Water is facing serious criticism from its junior bondholders, who have accused the utility’s senior creditors of imposing “predatory” conditions on a £3 billion emergency loan. The junior bondholders argue that these conditions are an attempt to evade necessary regulatory oversight.
On Tuesday, this group of bondholders filed official paperwork in court to seek approval for their own loan proposal. The situation comes as Thames Water, which serves millions of customers in London, struggles to secure funding. If the company cannot raise the necessary financing, it could find itself out of cash by March, potentially leading to temporary government oversight.
The junior bondholders claim that the current proposal seeks to bypass necessary approvals from the water regulator, Ofwat, which they believe is essential for a utility that serves such a large customer base. They highlighted the importance of adhering to regulatory procedures when it comes to managing critical services.
Last month, during a court hearing in London, tensions rose as different groups of bondholders argued against one another. The junior bondholders indicated that they would contest the ongoing proceedings and propose their own restructuring plan for Thames Water.
In their objections filed with the court, the junior bondholders raised concerns about the high costs associated with the senior loan and criticized the restrictive conditions of the debt, which could limit the utility’s ability to raise necessary equity. They also pointed out flaws in the evidence presented in support of the senior loan proposal, specifically its failure to reflect recent regulatory changes regarding customer billing.
A spokesperson for the junior bondholders expressed their strong opposition, asserting that relying on outdated information for such a costly loan jeopardizes the essential service Thames Water provides. They emphasized that Thames Water should have explored better terms in a competitive process instead of defaulting to agreements with senior creditors.
In response, Thames Water stated that its leadership is focused on executing the company plan, ensuring stability, and aiming for the best outcomes for customers and stakeholders. Ofwat acknowledged the alternative plan proposed by the junior bondholders, reiterating that it is the company’s responsibility to meet its regulatory obligations.
As of now, the group representing the senior bondholders has chosen not to comment further.