Creditors to Thames Water will start work on their own proposal to rescue the beleaguered UK utility firm and avoid nationalisation.

A group holding around £10 billion of the firm’s debt is drawing up a plan to address Thames Water’s need for new funds and its unsustainable debt pile, according to people familiar with the matter, who spoke to Bloomberg on the condition of anonymity. Thames Water desperately needs to find £3.3 billion in equity before it runs out of money at the end of May. 

The set of creditors, advised by Akin Gump Strauss Hauer & Feld and Jefferies Financial Group Inc, will work on its plan in parallel with Thames Water’s attempts to attract new equity investors, the people familiar said. Both potential equity investors and creditors will carry out due diligence on Thames Water’s business plan before drafting their proposals, they added.  

The creditor-led solution, which would include the provision of new equity from debt investors, could both replace or be combined with potential offers of new funds from external parties, the people said. They added that the proposal could help the company avoid nationalisation.

Talks between the company and its creditors kicked off following a draft ruling by UK water regulator Oftwat in July, when it rejected plans for a 43% bill hike by 2030 and said it wanted to put Thames Water into a special regulatory regime.

The creditor group holds public and private bonds of the operating company Thames Water Utilities Ltd and is led by a committee including institutions such as Apollo Global Management, BlackRock Inc and Elliott Investment Management. A separate group of bank lenders has been working with financial advisor Perella Weinberg Partners, Bloomberg reported in June.

  - Bloomberg