Thames Water set for another vital court ruling amid administration warning
A former senior director said the water firm could collapse soon without a funding deal, which would bring it under temporary state ownership.
Thames Water is at “real risk” of falling into administration within weeks, a former director has warned, as it nears a crucial court decision on a rescue funding package.
The Court of Appeal is expected to decide early this week whether Thames can borrow £3 billion from lenders, or whether to uphold objections from a small group of rival creditors, with a decision due as soon as Monday.
If the funding plan goes ahead, it will buy Thames’ bosses more time to find a longer term source of cash, which would likely come by selling the company.
Colm Gibson, former head of economic regulation at Thames Water, told BBC Radio 4’s Today programme that the company could collapse if the money is denied.
He said: “Thames will need to get financing from somewhere.
“If it can’t arrange that finance to carry on it will inevitably end up in special administration.
“If the court says no then there’s a real risk that Thames ends up in special administration in the next few weeks.”
Thames Water is England’s biggest water firm and supplies about 16 million households across London and the South East.
But it is in at least £16 billion of debt, and bosses have argued it will go out of business in March without borrowing even more cash.
If that happens, the taps in people’s homes would still work and toilets would still flush – but it would be damaging for the finance firms which Thames owes billions of pounds to.
Many of them would see those debts written off and suffer hefty financial losses.
Thames would instead come under temporary Government control until a new buyer is found, under a process known as a special administration regime.
Labour has said it wants to avoid that scenario, citing extra costs to taxpayers of running the water company.
Experts have argued those costs will eventually be recouped by the proceeds of selling Thames back to a private sector buyer.
On the other hand, the £3 billion rescue loan would come in two £1.5 billion instalments, and would be enough to last Thames Water for a further one year.
The loan is being provided by a group of Thames Water’s senior creditors, a group of hedge funds, banks and other big investment firms that it already owes about £11.5 billion, including Abrdn, M&G, Elliott Management and Invesco.
It was approved by a High Court judge in February, who at the time described the terms as “eye-watering”.
The rival group of Thames’ secondary creditors, along with a Liberal Democrat MP Charlie Maynard, are challenging the decision to sanction the plan at the Court of Appeal, claiming that Mr Justice Leech was wrong to approve it.
Mr Maynard has said he is challenging the decision on behalf of his constituents, and has previously described the £3 billion rescue loan as “throwing good money after bad”.
