Thames pauses CMA appeal as it hopes for market-led solution post court win

Appeal against emergency funding proposals dismissed

Thames Water received court approval for a £3bn loan from creditors which has enabled it to avoid entering the Government’s Special Administration Regime (SAR).

The junior creditors, who argued that they could face substantial losses under the deal, are waiting for a full judgment to be handed down by the Court of Appeal before deciding whether to make a further legal challenge. Thames had submitted evidence that its working capital position would become precariously stretched by the end of March, but it appears that there will be at least £100m of cash to tide it over until early April when it can draw on the new emergency loan to pay fees to its advisors. For the six preliminary bidders for Thames and its other creditors, the emergency funding provides visibility that cash is available.  

CMA delay request 

Thames has formally asked Ofwat to delay its CMA referral for a period of up to 18 weeks from 18 March 2025. Thames said in a statement that the deferral is not a withdrawal of the request for the referral. “Thames remains of the view that the Final Determination does not serve the interests of Thames Water's customers, communities and the environment. However, it has concluded that recent discussions hold out the prospect of unlocking a market-led solution for the recapitalisation of the company, including through an equity raise, without the need for a CMA reference.”

Equity raise update 

Thames has also confirmed that it has received bids from six parties and has been conducting a detailed assessment of each proposal. Thames continues to target having agreed transaction terms in the second quarter of 2025, with a view to completing a recapitalisation in the third quarter of 2025.

The proposals involve a range of potential valuations, structures and outcomes for stakeholders. Of the five proposals that provided financial metrics, all except one (from a Class B Creditor and with significant conditions attached) indicated a material impairment of the Class A debt. Relevant creditors would receive – in exchange for debt impairment – certain rights to share in future growth in the value of the company, and/or will have the ability to co-invest in the business. 

Importantly Thames confirmed that most proposals are conditional on "further, and varying, regulatory support and accommodations being achieved." Thames has asked for leniency on both fines and performance penalties to offer bidders financial clarity. It admits that “there is no certainty that a binding equity proposal will be forthcoming or that any such proposals will be capable of being implemented”. 

Documentary reveals poor state of assets and low morale at Thames 

The public was shown the poor state of Thames’ infrastructure, and low staff morale, in a BBC documentary which aired last week. Filmed over six months, the documentary followed new CEO Chris Weston and his executive team as they confront the public ire on the parlous state of Thames’ assets and balance sheet.

The inadequate storage capacity at London’s Mogden sewage works was also demonstrated, leading in the programme not only to diluted sewage overflows into the Thames but also to the resignation of the site manager, unable to make headway to improve the unsatisfactory performance of the works during the winter storms.