Thames Water creditors prepare for legal fight over possible nationalisation
A group of investors pursuing a rescue bid for Thames Water has said it is willing to discuss greater public control but is also preparing for a potential multi-billion pound legal battle if the company is nationalised.
London & Valley Water (L&VW), a consortium of 100 institutional investors holding £17bn of Thames Water's £21bn debt, has stated it is open to government involvement but not public ownership. Mike McTighe, the corporate troubleshooter leading the governance overhaul and new board formation, said the consortium wants to work constructively with incoming Prime Minister Andy Burnham.
McTighe, who is likely to become Thames Water's chair if the consortium's £10bn rescue deal is approved, expressed a desire to meet ministers to discuss enhancing public control over the company's operations. Reports indicate Burnham plans to transfer the company into a special administration regime (SAR), a form of temporary nationalisation. The SAR proposal would shift operational costs to taxpayers, with creditors estimating the bill at £2bn.
L&VW, which includes fund managers such as Apollo Global Management, Elliott Management, Farallon Capital Management and Silver Point Capital, has hired law firm Pallas Partners to strengthen its legal position in case of nationalisation. A source close to the consortium said creditors are assessing all potential outcomes but are not currently taking legal action; this is a precautionary measure.
Thames Water, serving 16 million customers in London and the Thames Valley, is struggling under debt interest payments accumulated since privatisation. Its future will be one of the most pressing issues for Burnham upon taking office. McTighe emphasised the consortium's readiness to recapitalise the company and return it to investment grade, but urgent government engagement is needed.
Creditors had previously attempted to take ownership after a failed sale to KKR last year. However, their plans were cast into doubt when Environment Secretary Emma Reynolds wrote to regulator Ofwat expressing concerns about the deal terms.
