Thames' premium-priced emergency funding clears the first hurdle

Thames announced last week that more than 75% of class A debtors had signed a premium-priced transaction support agreement by the 11 November deadline, which qualified them to receive the non-cash early-bird fee of 0.75%. No extension was made to the deadline despite the late-to-the-table but cheaper proposal from the B class holders. Thames management said that this is an important milestone in implementing its proposed Liquidity Extension Transaction. Thames hoped that the requisite consent levels will be achieved at the first bondholder meeting to be held today (18 November).

The current expected timetable for the implementation of the restructuring plan is: 

• Convening hearing: 17 December 2024

• Creditor meeting: week commencing 13 January 2025

• Sanctions hearing: 20 January 2025

• Effective date: 31 January 2025

Questions remain though on the haste of the management team to proceed with a premium-priced debt package. Have the directors exercised independent judgement, reasonable skill, care and diligence in comparing competing offers in line with their statutory duties? The problem with the quick fix is that the £3.25bn equity requirement, which is needed to underpin Thames’ investment plans, may well require an equity risk premium relative to the 9.75% cost of debt. Expensive finance will prolong Thames’ regulatory underperformance relative to the industry's allowed base return.