Thames Water creditors offer £1bn ‘sweetener’ in rescue deal

Thames Water’s largest group of creditors is to offer an additional £1bn-plus sweetener in a bid to persuade Ofwat and the government to pursue a rescue deal with them that would head off the nationalisation of Britain’s biggest water utility.

Sky News has learnt that the senior creditors, which account for roughly £13bn of Thames Water‘s top-ranking debt, will propose this month that they inject hundreds of millions of pounds of new equity and write off a substantial additional portion of their existing capital.

In total, the extra equity and debt haircut are understood to total roughly £1.25bn, although the precise split between them was unclear on Monday evening.

Money latest: The £80 toy topping Christmas list

The numbers were still subject to being finalised as part of a comprehensive plan to be submitted to Ofwat, according to people close to the process.

Thames Water has about 16 million customers and serves about a quarter of the UK population.

The creditor group, which includes funds such as Elliott Management and Silver Point Capital, is racing to secure backing for a deal that would avoid seeing their investments effectively wiped out in a special administration regime (SAR).

Sky News revealed last month that Steve Reed, the environment secretary, had authorised the appointment of FTI Consulting, a City restructuring firm, to advise on contingency planning for a SAR.

On Monday, The Times reported that Rachel Reeves, the chancellor, had reaffirmed the government’s desire to see a “market-based solution” to the crisis at Thames Water.

The company’s main group of creditors had already offered £3bn of new equity and roughly £2bn of debt financing, which, alongside other elements, represented a roughly 20pc haircut on their existing exposure to Thames Water.

On Tuesday, the creditors are expected to set out further details of their operational plans for the company, in an attempt to allay concerns that they are insufficiently experienced to take on the task of running the UK’s biggest water company.