(Bloomberg) -- Some of the biggest Thames Water bondholders have signed non-disclosure agreements to access sensitive information about the firm as debt talks progress. That also means they can no longer trade the company’s bonds.
The step is key to pushing forward discussions with Britain’s largest water and sewage company about a cash injection to keep operations running, according to people familiar with the matter, who asked not to be identified. The bondholders that signed the NDA form a steering committee that represents the interests of a creditor group led by Jefferies Financial Group Inc. and Akin Gump Strauss Hauer & Feld LLP
Thames Water has previously approached the creditor group, which holds about £10 billion ($13.2 billion) of the firm’s debt, to ask for a cash injection and the request was agreed in principle, the people familiar said.
Signing NDAs to access more information about a company is one of the many steps creditors take to reaching an agreement with a debt-laden company. While the discussions are progressing, it doesn’t mean that the creditors in the steering committee agree on everything. Some hedge funds, for instance, have been pushing for a higher interest rate on the cash injection than others in the group, according to people familiar with the discussions.
Creditors are also awaiting clarity on whether Thames Water will be able to access some reserve cash that it was restricted from using under the terms of its debt contracts, the people said. The amount of cash available would help determine the final size of cash injection needed.
Public Scrutiny
Thames needs an estimated £1 billion by the end of the year to keep operations running, the people familiar said. Creditors have said they won’t inject the money without a signal from UK water regulator Ofwat that it’s willing to offer more attractive terms to investors. Thames Water declined to comment.
The industry has come under intense public scrutiny for pollution and sewage leaks, while struggling to upgrade aging infrastructure in the face of soaring interest rates. Ofwat previously rejected plans for Thames to push some of the burden onto customers by hiking bills by 40%. Thames Water also asked Ofwat to raise the allowed return on equity from its proposed 4.8% to allow for better reward to investors.
Thames Water rolled over a £410 million revolving credit facility on Monday that had been set to mature, according to the company’s financial report published last week that said management also expects to roll over other RCFs coming due over the next 12 months.
The next debt hurdle is a C$250 million ($183 million) bond set to mature on Dec. 12 this year.
Meanwhile on Tuesday, Thames Water received a penalty of £56.8 million from Ofwat for missing targets on stemming chronic leaks and sewage spills, the largest fine in Ofwat’s annual review of the industry.
--With assistance from Abhinav Ramnarayan and Jessica Shankleman.
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