Thames Water Has Just Two Rescue Bids With Equity Deadline Hours Away

Thames Water, the UK's largest water and sewage supplier, is facing a critical juncture as it races against time to secure new equity investments before its deadline expires. With only hours left, the company has received just two rescue bids, raising concerns about its financial future and the potential for a government bailout.

Thames Water, which serves over 15 million customers, is drowning under a £19 billion debt burden and faces the prospect of temporary nationalisation if it cannot secure new funding. The company has been engaged in a bitter legal fight among rival creditor groups, with one syndicate of lenders seeking to extend up to £3 billion of financing to the company, while another group has submitted an alternative plan.



The rescue bids come from Covalis Capital LLP and Castle Water Ltd. Covalis has submitted a £5 billion ($6.4 billion) bid to take over Thames Water, involving plans to review the business, sell assets, and list the remainder on the stock market. The bid also includes a "golden share" for the government, granting it additional rights, including a seat on the board. Castle Water, on the other hand, has proposed a bid to inject £4 billion of equity into Thames Water.

However, the rescue bids face several challenges, including the need for regulatory approval and the uncertainty surrounding Thames Water's future. The company is also awaiting a key ruling from the water regulator Ofwat on its spending plans for the next five years, which could impact the attractiveness of the investment for potential bidders.

Moreover, political pressure is mounting from critics of the company who argue that it should not be allowed to add to its debt burden. Charlie Maynard, the Liberal Democrat MP for Witney, has submitted a witness statement to the court urging it to reject a restructuring plan that would add to Thames Water's debt.

The limited number of rescue bids for Thames Water can be attributed to several factors, including the uncertainty about returns and equity returns, debt restructuring complications, political pressure, and the lack of clarity over the company's financial situation. To attract more investors, Thames Water and its advisors should address these factors by providing clear and detailed information about the company's financial situation, addressing political concerns, streamlining the debt restructuring process, and engaging with potential investors early and often.

As the deadline for equity proposals approaches, Thames Water faces an uphill battle to secure the necessary funding to avoid a government bailout. The company's future hangs in the balance, and the outcome of this critical juncture will have significant implications for its customers, creditors, and the broader economy.