Thames Water to pay £749mn under creditor takeover deal
Costs mount for restructuring of UK’s biggest water company as it strives to avoid nationalisation
Thames Water will be on the hook to pay £749mn, including advisory fees to bankers and lawyers, if a controversial deal that would hand senior creditors control of the utility is approved.
The emergency deal, which has drawn fresh scrutiny from politicians in recent weeks, would cost the UK’s largest water company £160mn in fees to senior creditors, as well as £254mn in “other costs” dominated by advisory fees to lawyers and bankers, according to a summary of terms submitted to the sector regulator by creditors.
Thames Water would also pay an estimated £285mn in accrued interest owed to creditors on the day a deal was completed, according to the terms seen by the FT, on top of almost £50mn in fees owed to other creditors.
Lenders including hedge fund Elliott Management and private capital group Apollo Global Management are locked in negotiations with the water regulator, Ofwat, as they attempt to take ownership of the UK’s largest provider, preventing it from falling into a form of temporary nationalisation.
Time is running out to reach an agreement with Thames Water set to run out of money in October. Ofwat must submit any deal to a three-month public consultation, and the deal will also have to be signed off by the High Court. Creditors first went to Ofwat for approval in June 2025.
Under the terms being reviewed by Ofwat, the company would also be allowed to avoid certain new penalties over the next four years in exchange for a £700mn commitment by investors. This would be used to improve assets, according to people familiar with the matter.
Creditors would inject £3.35bn of new equity into the utility, as well as providing £3.25bn of new debt, which could be topped up with an extra £3.3bn.
Meanwhile, Thames Water would pay £160mn in commitment fees to certain creditors who provide the £6.55bn of new debt. The sum is likely to be paid to Apollo, which has agreed in principle to backstop the entirety of the credit facility, according to three people familiar with the matter. Other creditors could still end up taking smaller chunks of the deal and therefore portions of the fee.
The fees add to mounting costs associated with the restructuring of the near-bankrupt company, including £20mn that Thames Water paid to cover the due diligence costs of US private equity firm KKR for its abortive attempt to take over the company. The FT previously reported that the utility would have paid £100mn on its creditors’ advisory fees by September last year.
The cash-strapped utility, which serves 16mn households in London and the south-east of England, has been trying to avoid entering temporary nationalisation for more than two years as it struggles to deal with almost £20bn of debt.
The creditors have proposed a new management plan, which could lead to a stock market listing as soon as 2030.
US hedge fund Silver Point Capital is now Thames Water’s largest creditor, owning more than £2bn of the company’s bonds, according to two people familiar with the matter.
The new debt would come in addition to £3bn of emergency financing approved last year. That facility, of which £2.25bn has already been drawn, costs Thames Water an interest rate of 9.75 per cent plus other fees and sweeteners estimated at about £800mn, the FT previously reported.
Silver Point and Apollo declined to comment.
Ofwat said that it is reviewing the creditor plans to check whether they will improve Thames Water’s performance and finances “to the benefit of customers and the environment”.
Thames Water said it “remains focused on securing a recapitalisation to restore financial stability, continue its operational turnaround and deliver essential services for 16 million customers [. . . ] the proposed deal is intended to support and accelerate that turnaround”.
The creditor group said that the £10bn of new capital it was providing would help improve services and clean up rivers.
It added: “Thames Water’s restructuring fees and costs are paid for entirely by its creditors — not a penny will come from customer money.
“Under the turnaround plan, regulators will be given more control and oversight to hold Thames Water accountable for delivering a transformation. All fines will be paid, no dividends will be taken until the company is turned around and £9.4bn of debt is written off by investors.”