A consortium of Thames Water's bondholders has put forward a £3bn debt proposal to the struggling utility company as it seeks to stabilise its financial position.
The group, representing approximately 75% of Thames Water's class B bondholders, announced this morning that they have submitted an "executed and legally binding Backstop Agreement" for a debt facility aimed at addressing the company's urgent funding requirements, as reported by .
"The B Group promised Thames Water it would deliver a fully funded commitment, and it has now done exactly that very rapidly and in full," the bondholders stated.
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They further commented on the swift arrangement of the financing: "The group has been able to ensure the fully underwritten financing commitment in a very short period of time as a result of significant investor appetite, which reflects the desire among many creditors to deliver the best deal for Thames Water."
This new debt offer is intended to outdo a more expensive alternative from a set of class A creditors, including American hedge funds Elliott and Silverpoint.
Under the competing plan, Thames Water would receive an initial £1.5bn loan with a hefty annual interest rate of 9.75%. An additional £1.5bn could be accessed if the industry regulator Ofwat turns down Thames Water's request to increase customer bills next year.
Thames Water has been actively seeking solutions to reinforce its balance sheet and stave off insolvency while it engages with Ofwat regarding its expenditure proposals.
The South Eastern utility company is part of a consortium advocating for a larger increase in bills next year to generate more funds for investment. This proposal would result in a 40 per cent rise in the average bill for customers in England and Wales by 2030, reaching £615 annually.
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Thames has been grappling with a crisis since March when a faction of its shareholders deemed its business strategies unviable. Despite initially supporting the financing offer from the class A holders, the emergence of a competing bid could compel the company to reassess.
"With this substantial commitment in hand, Thames Water should be allowed to choose the most affordable funding available to it, in order to deliver its investment plans and place it on a long-term recovery path," the group declared in a statement this morning.
"The B Group urges all other creditors of the company to back this committed financing on that basis rather than unnecessarily paying lenders interest on costly debt with money that could be invested in the water and wastewater supplies of London and the Thames Valley."
Class B debtholders reportedly believe that Thames Water could save hundreds of millions of pounds in interest payments and fees over the coming year if the company supports their proposal, according to Sky News.
US private equity firm KKR is also reportedly interested in an equity raising process being managed by Rothschild bankers, as reported last week.