Thames Water is seeking High Court approval today for a £3bn emergency loan to keep the troubled utility afloat, in a crucial 48-hours for the company and the industry.
At a hearing at the Royal Courts of Justice before Mr Justice Trower on Tuesday, Thames will present the loan as the first stage of a restructuring plan it says is necessary to avoid running out of cash in the spring.
Two days later on Thursday, regulator Ofwat will reveal its “final determination” on water company five-year business plans and how much they will be permitted to increase consumer bills and what return they can offer investors.
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It is a crucial moment not just for Thames but for the entire privatised water system, with companies facing increased borrowing costs and pressure to address sewage outflows, climate change and population growth.
Under the restructuring plan, Thames Water’s A-class bondholders will provide a £3bn loan over two and a half years at a rate of 9.75%. The loan would have “super-senior” status, putting it at the front of the queue of the company’s creditors in the event of a default.
The class A bondholders are thought to control up to £12bn of the almost £17bn of net debt at the regulated company level.
Court approval is required as the terms of the loan effectively breach Thames Water’s agreements with its existing creditors by pushing their claims lower down the list of seniority.
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Should the judge approve the first step, final ratification will come after a meeting of shareholders next month.
The move, which requires the support of 75% of creditors, is expected to be opposed by a group of Class B bondholders, holding around £1bn of debt, who say they can offer a similar loan on less expensive terms to the company.
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Campaigners are expected to gather at the Royal Courts of Justice to oppose the plan, saying the loan will cost £300m a year in interest and fees, and cost Thames Water customers £250 a year.
The company is expected to tell the judge that it has the support of banks that provide financial derivatives alongside the A class creditors, and that it is the first step in a restructuring intended to attract fresh equity.
Under relatively new legislation introduced in 2020, a judge can approve a restructuring plan if it has the support of 75% of all types of creditor, but if not they can consider a “relevant alternative” that leaves none of them worse off.
Thames Water is likely to argue that the alternative to its restructuring plan would be the company falling into the state-managed Special Administration Regime, which would likely see creditors lose money.
People whose homes have been destroyed by the floods sweeping across parts of the UK over the past couple of days have been telling Sky News how they coped with the deluge.
In Lincolnshire, where a major incident has been declared, Terry, from Grantham, showed a Sky crew the aftermath of the deluge in his home, which was left under two feet of water.
“Everything’s gone,” he said, adding that he was “devastated”.
The first sign of trouble came at lunchtime on Monday, when his wife woke him and said there was water coming in [to the house], and “within a few minutes, the whole house was flooded”.
They rushed their belongings and pets upstairs, he said, as he revealed the damage to the flooded living room and kitchen, where the water mark was above a power socket.
Terry said the kitchen, where the floor was covered in sludge, smelled of mud and sewage, and their furniture and carpets were wrecked.
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They have no electricity and the food in the cupboards and freezer was “completely ruined”.
Graham Johnson, who lives in a boat with his wife and dog, in the village of Barrow upon Soar in Leicestershire, was in the pub on Monday night, before the water started to rise “rapidly”.
People living in a local caravan park were moved as a severe flood warning was issued.
Mr Johnson said he had gone out “for a couple of pints as usual and, the next thing we know, bingo”.
The couple feared their boat home was about to be swept towards the bridge.
“That’s our pride and joy, where we live, and we didn’t want to lose it,” he said, as he praised the “fantastic” emergency services, who rescued them and their dog after a nervy three-hour wait.
They were two of the 59 people rescued by firefighters in the county, where a major incident was declared and crews were called out to 160 flood-related incidents, the Fire Brigades Union (FBU) said.
Another Leicestershire resident whose home was inundated was Qasim Abdullah from Loughborough.
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Flooding across East Midlands
Pictures taken by the Associated Press show him walking through almost knee-deep water in his living room.
In nearby Quorn, businesses have shut as the main high street has flooded for the second time in as many years.
Two of the pubs in particular have been damaged.
Last year, residents had to launch a crowd fundraiser to help pay for the costs of renovation. Not to mention soaring insurance premiums.
Indy Burmi, who owns a hair salon and restaurant, hasn’t suffered flooding, but said he’s had to close up and cancel all Tuesday’s reservations, as his clients simply can’t get into the village.
And, with more rain forecast, conditions could get even worse in the short term, while residents worry that an annual battle with rising water is now the new normal.
Elsewhere in the UK, the next danger is from ice forming on untreated surfaces after rain on Tuesday evening, the Met Office has said, as it issued a new warning for northern England and Wales from 5pm until midday on Wednesday.
The Royal Liverpool University Hospital has declared a critical incident due to “exceptionally high” demand on A&E and patients being admitted to wards.
The hospital said there had been a spike in people with flu and respiratory illnesses going to emergency departments in recent weeks.
A spokesperson for the hospital said it had a “comprehensive plan in place” and was “taking all the necessary actions to manage the challenging circumstances”.
“We are working with partner organisations to ensure those that are medically fit can leave hospital safely and at the earliest opportunity,” they added.
The hospital warned some people would experience delays as it prioritises the sickest patients.
People whose case isn’t an emergency are being asked to see their GP, pharmacy or walk-in centre – or call the 111 service for advice.
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The Royal Liverpool University Hospital is in the city centre and is the biggest hospital in Merseyside and Cheshire.
Declaring a critical incident can happen when a hospital is experiencing exceptional demand, or sometimes if there is a serious problem with staffing levels.
It indicates it can’t function as normal and allows it to take extra measures to protect patients, such as prioritising the most unwell people and getting support from other agencies.
It could last hours, a few days, or weeks if necessary.
A critical incident was also declared on Friday by the NHS Cornwall and Isles of Scilly Integrated Care Board.
It said it had seen almost four times as many inpatients compared with last year and urged people with flu to avoid going to A&E.