Thames Water Restructuring: A Landmark Case Study

‍FLT recently hosted the first of its Knowledge Series of webinars – this one focused on Thames Water. Below is a summary of that event – to access the webinar replay, click here.

A New Era in UK Restructuring

Thames Water marks one of the most significant corporaterestructurings in UK history, with a £19 billion debt stack under review. Asthe first major test of the 2020 UK restructuring plan process, this casebrings unprecedented complexity and sets new standards for future restructurings.

Unique Stakeholder Dynamics

Beyond traditional corporate restructurings, Thames Water introduces a diverse group of stakeholders:

• Class A and B creditors
• Government officials from Defra and Treasury Parliamentary members
• Regulatory bodies
• Environmental groups representing 16 million bill payers

The environmental groups' involvement breaks new ground - never before have environmental advocates participated in such a restructuring process.

Two-Phase Restructuring Strategy

The current plan takes an unusual approach by splitting the restructuring into two distinct phases. Phase one addresses immediate liquidity needs without debt reduction, serving as a bridge to a more comprehensive second phase. This differs from traditional restructurings where debt reduction happens immediately.

Three Potential Outcomes

The situation faces three possible paths forward:

• Approval and implementation of the company's current plan
• Simultaneous processing of alternative plans from Class A and B creditors
• Implementation of the Special Administration Regime (SAR)

The SAR option stands out as particularly significant - while specifically designed for water companies, it has never been implemented.

Critical Considerations

Several key factors shape this restructuring, all of which we explored in detail in our recent FLT Knowledge Series webinar:

• Complex valuation methodologies
• Selection criteria for the UK restructuring plan
• Multiple obstacles to plan sanctioning
• Potential for parallel processing of competing proposals
• First-time application of water company SAR

Looking Forward

The Thames Water restructuring demonstrates the evolution of corporate financial management, particularly in regulated utilities. The involvement of environmental advocates alongside traditional financial stakeholders adds a layer of complexity.

The outcome will influence how the UK approaches troubled utility restructurings, balancing financial stability with public interest considerations. As the process unfolds, it continues to set precedents for handling complex, multi-stakeholder restructurings in regulated industries.

This case stands as a defining moment in UK corporate restructuring history, combining traditional financial considerations with broader public interest factors in ways never seen before.

Watch the Replay

To gain access to the replay for the Thames Water webinar, register for our Primary Market Education Series here.

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