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UTILITIES: Thames Water (THAMES Ba2[N]): Weekend Press

UTILITIES
  • Both The Times and The Telegraph name large infrastructure funds Thames Water has approached for its equity raise. The reports suggest an internal deadline of November, ahead of Ofwat’s final determination. We assume investors will use Ofwat’s draft determination allowed returns, with no further compromise towards Thames Water’s ask.
  • As the current capital structure is uninvestable, reports from the Times that new equity injection alongside the creditor’s restructuring plan are the only way for this to make sense to us.
  • Thames has also appointed a restructuring expert as an independent non-executive director.
  • We assume investors would only participate at a discounted EV/RCV of around 80% to compensate for inadequate allowed returns.
  • A fast restructuring that avoids SAR would be a positive outcome for bondholders’ recovery, avoiding senior government funding which would be top of the waterfall.
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