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Thames Water has won support from three-quarters of its creditors for an emergency funding deal which would throw the struggling utility company a £3 billion lifeline.
The firm said on Wednesday that creditors holding more than 75% of its Class A debt – the least risky class of bonds in its debt pile – have agreed to the deal.
A cluster of investment giants including BlackRock, Abrdn and M&G drew up the funding plan, which, if approved, effectively guarantees Thames Water can keep operating until October 2025.
But the 75% threshold is significant because it is the minimum amount needed for legal approval.
Thames Water still needs it to be passed in court though, and is aiming for a December 17 hearing.
The company said in a statement that reaching the three-quarters mark represents “an important milestone in implementing” the funding deal.
The plan would see Thames Water initially get a £1.5 billion loan, which comes with an annual interest rate of 9.75% plus fees.
There would be capacity for a further £1.5 billion, across two tranches of £750 million, if the company appeals to competition regulators over planned bill increases across the water sector.
Water watchdog Ofwat is expected to confirm in December how much it will allow water companies to increase their bills by over the next five years.
Securing the second cash boost of £1.5 billion would fund the company until May 2026.
It comes amid a growing dispute against a secondary group of creditors who also hold a portion of Thames Water’s debt – thought to be about £1 billion of riskier, Class B bonds.
The Class B bondholders drew up a rival fundraising plan in October, which they say is less expensive than the interest rate put forward by the Class A group, but it was not endorsed by the utility company.
Thames Water has been at the centre of growing public outrage over the extent of pollution, rising bills, high dividends, and executive pay and bonuses at the UK’s privatised water firms.
The company, which is the UK’s largest water provider, is more than £16 billion in debt, while also facing a crisis caused by long-term lack of investment in its infrastructure.
The group of Class A creditors which drew up the emergency funding plan is made up of more than 100 global investment firms.
It also includes the US hedge fund Elliott Investment Management, plus investment firms Apollo Global Management and Silver Point Capital.