Class A creditors, which include hedge funds Elliott Management and Silver Point Capital, are spearheading a £10bn ($13.5bn) restructuring plan to rescue Thames Water, the UK’s largest water utility, as the company teeters on the edge of insolvency, according to a report by Bloomberg.
The report cites unnamed people familiar with the matter as revealing that the proposal, which mirrors a previous deal tabled by KKR before it withdrew, involves a comprehensive balance sheet overhaul, including a multibillion-pound haircut for senior bondholders and sweeping debt reductions across Class B bonds, subordinated loans, and holding company-level debt—totalling around £3bn in losses for junior creditors.
To recapitalise the utility, the plan also includes a £3bn to £4bn equity injection, aimed at restoring confidence and securing the company’s investment-grade status. Final terms are still under discussion.
A spokesperson for the senior creditor group confirmed the submission of a “detailed long-term turnaround proposal” to stabilise the business, restore its financial health, and rebuild public and regulatory trust. Thames Water declined to comment.
The embattled utility is in urgent need of fresh capital. Already drawing on an emergency liquidity facility provided by senior creditors, Thames Water must plug a gaping hole in its finances, with a total debt burden nearing £20bn. Its previous shareholders have walked away, effectively handing over the reins to its creditors.
The company’s crisis underscores the risks tied to long-dated infrastructure investments in regulated industries, especially as macroeconomic volatility and interest rate hikes challenge traditional capital structures. The case also highlights growing hedge fund interest in distressed infrastructure assets, a space traditionally dominated by pension funds and sovereign wealth players.
Regulatory oversight will be key. Ofwat, the UK’s water regulator, is expected to hold talks with the creditor group in the coming weeks as the proposed restructuring advances. The group has stated that the plan is fully funded, although any failure to raise the required equity could push Thames Water into a Special Administration Regime (SAR) – a temporary state – controlled process used for vital but insolvent utilities.
