Parent Company of Thames Water Notifies Creditors of Debt Default

Parent Company of Thames Water Notifies Creditors of Debt Default

London (Parliament News) – The parent company of Thames Water defaults on debt, prompting concerns of restructuring or collapse. Shareholders declined £500m to stabilize finances.

The parent company of disturbed Thames Water has revealed to its creditors it has defaulted on its debt, extending the prospect that the company could meet a significant restructuring or even eventually collapse.

Kemble Water has skipped an interest payment that was scheduled on Tuesday and declared it had asked that its lenders and bondholders bear no creditor action to “provide a stable platform while all possibilities are explored” with its stakeholders.

According to the Guardian, the UK’s biggest water company, under tension over its sewage dumping record, said last week its shareholders had declined to pay £500m promised to stabilise its finances, deepening concerns over its survival.

Kemble’s Financial Struggles

Kemble is entirely supported via dividends received from Thames Water, and some of the £500m had been committed to pay loans owed by Kemble. Last week, Kemble said it would not be capable of repaying a £190m loan due by the end of April. The cost of the £400m Kemble bond, which is due to develop in 2026, has tumbled over the last year, indicating that debt holders acknowledged the company could default. Consultants at Alvarez & Marsal are operating with Kemble to assess its opportunities and engage with lenders and bondholders over its future debt structure.

Kemble is the top parent of the Thames Water operating company, which has 16m customers. The water company’s leaders have said that the Thames, which has almost £15bn of debts, and its customers are insulated and it would persist in operating as normal if Kemble tumbled. It has £2.4bn of funds at hand, which would notice it through to next summer, they expressed.

Kemble’s creditors could permit the company to “amend and extend” the £190m loan, buying time to permit a restructuring. The lenders have so far declined an extension and, if Kemble defaults, they could evolve shareholders in the company. It appeared on Thursday that Kemble’s lenders include ING, Allied Irish Banks, the Bank of China and the Industrial and Commercial Bank of China.

Chinese Banks’ Role in Kemble’s Crisis

The involvement of two Chinese banks could confuse the situation, as the UK government has been forced in recent years to limit Chinese ownership of crucial national infrastructure. However, the China Investment Corporation is already a Thames shareholder. A debt-for-equity exchange with Kemble’s creditors could also be bargained, but sources believe this opportunity is looking increasingly less likely.

Kemble stated: “The company expects that it will be in a position to provide a further update in the coming weeks.”

Ofwat’s Scrutiny on Thames Water’s Dividends

The government has formed a team to study the position amid calls for Thames to be renationalised. Rishi Sunak has so far defied those calls and is understood to be ready for the company to solve its financial troubles without state intervention. Thames has stated the industry regulator, Ofwat, is being too tough, assembling the company “uninvestable”. Shareholders have signalled they are inclined to write off the entirety of their £5bn investment rather than pump in more reserves if Ofwat does not give the company what it wants.

Thames wants to be entitled to secure significant bill increases, lower environmental fines and the capacity to pay dividends up to Kemble to service its debts. Ofwat is examining whether dividends of £37.5m delivered to Kemble last year by the Thames was a breach of the conditions of its licence.

Mathew Lawrence, a director at the think tank Common Wealth, stated Kemble’s default “highlights the fundamental risk in privatising our essential utilities. The corporate house of cards – over-leveraged while underinvesting – now chances collapsing, with the public left to gather the pieces.”

Federica Calabrò

Federica Calabrò is a journalist at Parliament News, She is covering Business and General World News. She is a native of Naples, commenced her career as a teller at Poste Italiane before following her passion for dance. Graduating in classical dance, she showcased her talents with two entertainment companies, enchanting audiences throughout Italy. Presently, Federica serves as the general secretary at the Allianz Bank Financial Advisors financial promotion center in Naples. In this capacity, she manages office forms, provides document assistance for Financial Advisors, oversees paperwork for the back office, and ensures smooth customer reception and assistance at the front office. Outside her professional obligations, Federica indulges in her passion for writing in her leisure time.