Connect with us

Published

on

Lenders holding £12bn of Thames Water’s debt have held face-to-face talks with Ofwat this week to pitch a rescue deal that they believe would avert the nationalisation of Britain’s biggest water utility.

Sky News has learnt that a creditor group advised by Jefferies, the investment bank, met officials from the industry regulator on Tuesday to present the outline principles of a business plan that could buy the company vital breathing space.

City sources said that the group now accounted for over £12bn of Thames Water‘s borrowings – roughly two-thirds of its total debts – and comprised 100 separate lenders.

The syndicate is racing to find a solution that would allow a restructuring that would incorporate a massive debt-for-equity swap and see fresh equity injected into the crisis-hit utility, which serves about 15 million customers in London and the South East.

A deal needs to be agreed by the middle of November because Ofwat is due to sign off its final regulatory determination for the company’s business plan at a board meeting in the second half of the month.

Creditors argue that Ofwat needs to demonstrate flexibility in its consideration of Thames Water’s business plan in order to make the company investible.

Further details of the creditor group’s proposals were unclear on Wednesday, although flexibility in relation to customer bill increases will inevitably be a component.

Thames Water is also facing a litany of regulatory fines over its poor customer service performance and dire record on sewage and water leaks.

Plans for an emergency liquidity facility of more than £1bn are also being drawn up, although they are yet to be finalised.

That finalising would buy Thames Water several months more to finalise a rescue plan.

Read more from business:
US threatens to break up Google

City investors back ‘competitive’ FTSE pay
Nandy to hold talks with Premier League clubs

Bankers at Rothschild have been trying to drum up investment in new Thames Water stock in recent months, but with little success amid a lack of visibility about the company’s survival prospects.

Sky News reported last month that Carlyle, the American investment giant, has become the latest global fund to weigh an investment in Thames Water.

Thames Water’s woes deepened recently when its credit rating was downgraded further into junk territory by two leading rating agencies.

Its future remains so shrouded in uncertainty because the industry watchdog, Ofwat, has rejected the company’s initial spending plans for the next five-year regulatory period.

Please use Chrome browser for a more accessible video player

From September: Thames Water boss can ‘save’ company

Ofwat is expected to sign off on the appointment of an independent monitor within days to scrutinise the company’s progress against its turnaround plan.

If new investment into Thames Water is not forthcoming before it runs out of cash, the government will have little choice but to sanction the temporary nationalisation of the company.

This would be done through a Special Administration Regime (SAR), a procedure tested only once before when Bulb Energy collapsed in 2021.

As part of its contingency planning for implementing a far-reaching restructuring, Thames Water has booked court dates in November to progress a rescue deal.

Shareholders have long since written off their investment in the company and will not play a role in any rescue deal.

These include a number of sovereign wealth funds and pension funds which plan to attend next week’s International Investment Summit in London.

A spokesperson for the creditor group declined to comment, while Ofwat has been contacted for comment.

Continue Reading

Business

US Federal Reserve defies calls from Donald Trump to cut interest rate

Published

on

By

US Federal Reserve defies calls from Donald Trump to cut interest rate

The Federal Reserve has defied calls from US President Donald Trump for a cut to the interest rate by leaving it unchanged.

The decision means it has an effective rate of 4.3%, where it has remained after the central bank, known as the Fed, reduced it three times last year.

“We’re keeping the rates high, and it’s hurting people from buying houses,” Mr Trump told reporters. “All because of the Fed.”

Money latest: Three major broadband firms hike prices

Mr Trump has repeatedly been asked whether he would fire Fed chair Jerome Powell if he failed to heed his demand to cut the rate.

In June, the US president labelled Mr Powell a “stupid person” after the Fed decided not to change rates. Then less than two weeks later, in a further attack, he said the Fed’s chair should “ashamed” and would “love” him to resign.

The US president has spent months verbally attacking Mr Powell.

More from US

Please use Chrome browser for a more accessible video player

Fed chair has ‘done a bad job’, says Trump

There were clear tensions between the pair last Thursday as they toured the Federal Reserve in Washington DC, which is undergoing renovations.

When taking questions, Mr Trump said: “I’d love him to lower interest rates,” then laughed and slapped Powell’s arm.

Donald Trump and Federal Reserve Chair Jerome Powell
Image:
There were clear tensions between the US President and Mr Powell during last week’s visit to the Federal Reserve. Pic: Reuters

The US president also challenged him, in front of reporters, about an alleged overspend on the renovations and produced paperwork to prove his point. Mr Powell shook his head as Trump made the claim.

When Mr Trump was asked what he would do as a real estate mogul if this happened to one of his projects, he said he’d fire his project manager – seemingly in reference to Mr Powell.

Donald Trump challenges Federal Reserve Chair Jerome Powell about the cost of renovations
Image:
Donald Trump challenged Mr Powell in front of reporters. Pic: Reuters

Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.

The Fed has expressed concern about the impact of Mr Trump’s signature economic policy of implementing new tariffs, taxes on imports to the US.

Please use Chrome browser for a more accessible video player

Trump’s tariffs: What you need to know

On Wednesday, the president said he was still negotiating with India on trade after announcing the US will impose a 25% tariff on goods imported from the country from Friday.

Mr Trump also signed an executive order on Wednesday implementing an additional 40% tariff on Brazil, bringing the total tariff amount to 50%, excluding certain products, including oil and precious metals.

Follow The World
Follow The World

Listen to The World with Richard Engel and Yalda Hakim every Wednesday

Tap to follow

Read more from Sky News:
Visa blamed for payment errors
Care provider nears collapse
Apollo set to buy £7bn stake in MFG

The committee which sets rates voted 9 to 2 to keep the benchmark rate steady, the two dissenters were appointees of President Trump who believe monetary policy is too tight.

In a policy statement to explain their decision, the Federal Reserve said that “uncertainty about the economic outlook remains elevated” but growth “moderated in the first half of the year,” possibly bolstering the case to lower rates at a future meeting.

Nathan Thooft, chief investment officer at Manulife Investment Management, described the rate decision as a “kind of a nothing burger” and it was “widely expected”.

Tony Welch, chief investment officer at SignatureFD, agreed that it was “broadly as expected”. He added: “That explains why you’re not seeing a lot of movement in the market right now because there’s nothing that’s surprising.”

Continue Reading

Business

Apollo charges in for stake in £7bn petrol retailer Motor Fuel Group

Published

on

By

Apollo charges in for stake in £7bn petrol retailer Motor Fuel Group

The investment giant Apollo Global Management is close to snapping up a stake in Motor Fuel Group (MFG), one of Britain’s biggest petrol forecourt empires, in a deal valuing it about £7bn.

Sky News has learnt that Apollo could announce as soon as Thursday that it has agreed to buy a large minority stake in MFG from Clayton Dubilier & Rice (CD&R), its current majority-owner.

The transaction will come after several months of talks involving CD&R and a range of prospective investors in a company which is rapidly expanding its presence in the electric vehicle charging infrastructure arena.

Money latest: Three major broadband providers confirm price hikes

Banking sources said there had been a “large appetite” to invest in the next phase of MFG’s growth, with CD&R having built the company from a mid-sized industry player over the course of more than a decade.

Lazard and Royal Bank of Canada are understood to be advising on the deal.

A stake of roughly 25-30% in MFG has been expected to change hands during the process, with Apollo’s investment said to be broadly in that range.

MFG is the largest independent forecourt operator in the UK, having grown from 360 sites at the point of CD&R’s acquisition of the company.

It trades under a number of brands, including Esso and Shell.

CD&R, which also owns the supermarket chain Morrisons, united MFG’s petrol forecourt businesses with that of the grocer in a £2.5bn transaction, which completed nearly 18 months ago.

MFG now comprises roughly 1,200 sites across Britain, with earnings before interest, tax, depreciation and amortisation (EBITDA) of about £700m anticipated in this financial year.

It is now focused on its role in the energy transition, with hundreds of electric vehicle charging points installed across its network, and growing its high-margin foodservice offering.

MFG has outlined plans to invest £400m in EV charging, and is now the second-largest ultra-rapid player in the UK – which delivers 100 miles of range in ten minutes – with close to 1,000 chargers.

It aims to grow that figure to 3,000 by 2030.

CD&R, which declined to comment on Wednesday afternoon, will retain a controlling stake in MFG after any stake sale, while Morrisons also holds a 20% interest in the company.

Read more from Sky News:
Visa blamed for payment errors
Care provider nears collapse
Gary Neville attacks NI rise

Bankers expect that the minority deal with Apollo will be followed a couple of years later with an initial public offering on the London stock market.

CD&R invested in MFG in 2015, making its investment a long-term one by the standards of most private equity holding periods.

The sale of a large minority stake at a £7bn enterprise valuation will crystallise a positive return for the US-based buyout firm.

CD&R and its investors have already been paid hundreds of millions of pounds in dividends from MFG, having seen its earnings grow 14-fold since the original purchase.

Morrisons’ rival, Asda, has undertaken a similar transaction with its petrol forecourts, with EG Group acquiring the Leeds-based grocer’s forecourt network.

EG Group, which along with Asda is controlled by private equity firm TDR Capital, is now being prepared for a listing in the US.

Apollo declined to comment.

Continue Reading

Business

Sainsbury’s blames Visa card issues for online payment failure

Published

on

By

Sainsbury's blames Visa card issues for online payment failure

J Sainsbury, the supermarket chain, was on Wednesday racing to resolve an issue with card payments made involving Visa and Barclays which was impacting customers’ ability to pay for online grocery orders.

Sky News understands that Sainsbury’s is working with Visa and Barclays to address the issue after a number of shoppers reported that their card payments had failed.

A Sainsbury’s spokeswoman initially said Visa card payments were to blame for the problems, with the retailer subsequently updating its position to say the technical issue actually rested with Barclays.

Money latest: The best places to retire in Britain

The grocer ruled out the possibility of a cyberattack and said its website and app were functioning normally, with no direct impact on customers.

The issue nevertheless illustrates the extent to which the industry is on high alert for cybersecurity-related incidents after a spate of attacks which have raised concerns about the sector’s resilience.

In recent months, major British retailers including Marks & Spencer, the Co-op and Harrods have been the victim of cyberattacks, with the impact on M&S particularly acute.

More from Money

M&S has said the attack on its systems would cost it at least £300m and forced it to suspend online orders for months.

The Co-op saw in-store availability of thousands of products disrupted for several weeks.

A Sainsbury’s spokesperson said, “We’re working with one of our payment providers to resolve a temporary issue processing some payments for our Groceries Online service.

“We continue to deliver orders for customers and our website and app are working as normal.”

Visa said: “”Visa systems are operating normally. We are working with our partners to help them investigate.”

Barclays has been contacted for comment.

Continue Reading

Trending