Thames Water vans are parked outside a home in London, on April 3.Toby Melville/Reuters
Britain’s Thames Water said on Friday it was in crunch talks with creditors about securing funds to keep it going for the next few months while it seeks to raise the billions of pounds of capital it needs to survive.
The company, which supplies a quarter of the U.K. population with water, has said it needs to raise equity of £3.25-billion ($4.3-billion) over the next five years. Without new investment it said it would run out of money by May 2025.
A formal process to raise new equity will be launched in the coming weeks, Thames Water said, although it added that it was not expected to conclude until after the water regulator had made a final decision on future tariffs, possibly in January.
The group, which has net debt of £15-billion, said it was working to secure short-term relief.
“We have entered into discussions with our financial stakeholders to release cash reserves under our financing. This would require majority creditor consent,” the company said.
Creditors representing a large chunk of Thames Water’s debt, who according to unconfirmed media reports include U.K. asset manager Abrdn and debt fund Elliott Management, are also working on a plan to provide the company with a short-term bridging facility.
“We, together with our financial stakeholders, are considering options for the extension of our liquidity runway to enable time to complete a recapitalization transaction,” Thames said.
That would stabilize Thames’s balance sheet and be a first step before a debt restructuring, ahead of its bid to attract new equity. The alternative would be nationalization under the government’s special administration regime.
The creditors were confident “a liquidity runway” to shore up available cash could be put to Thames, a source said.
Britain’s biggest water company has been teetering on the brink of collapse since its investors called the company “uninvestible” in March, blaming the regulator for not allowing it to increase water bills sufficiently.
It is at the centre of a public backlash against Britain’s privatized water industry, which has increasingly polluted rivers and seas with sewage, amid accusations that profit has been prioritized over the environment.
Thames Water said if its creditors do not let it draw on the £380-million of cash it needs in reserves under its financing arrangement, and it cannot access £420-million of Class A and Class B undrawn committed facilities, it could run out of cash at the end of December.
It has a further £550-million in undrawn reserve liquidity facilities available should it enter a standstill, where secured creditors agree not to demand repayment.
Thames Water has reserved court dates in November for a potential debt restructuring.
Thames Water said it had £1.57-billion of liquidity on Aug. 31.