Funding large KKR advances plan for Thames Water rescue bid

KKR, one of many world’s largest non-public fairness traders, is advancing plans to play an important position in a rescue of Britain’s largest water provider.

Sky Information has learnt that KKR, which manages belongings of greater than $600bn, has employed funding bankers and legal professionals to assist formulate a plan to inject billions of kilos of fairness into the corporate, which has greater than 15m clients.

PJT Companions has been engaged to behave for KKR on its curiosity in Thames Water forward of a deadline for proposals for an fairness elevate later this month, in line with insiders.

The appointment of PJT implies that KKR is critically curious about aiding a rescue of Thames Water, which is drowning beneath £19bn of debt and faces the prospect of momentary nationalisation amid a bitter authorized battle amongst rival creditor teams.

With out the brand new financing, Thames Water could possibly be pressured into an insolvency course of often called particular administration, which has been used within the UK earlier than within the case of the home power provider Bulb.

Particular administration would in all probability price the federal government billions of kilos whereas a break-up of Thames Water is finalised or a purchaser is discovered, and Sir Keir Starmer’s administration has mentioned it needs to keep away from such an end result.

Nevertheless, political stress is mounting from critics of the corporate who argue that it shouldn’t be allowed so as to add to its debt burden.

Charlie Maynard, the Liberal Democrat MP for Witney and a long-standing campaigner for an overhaul of water firm regulation has submitted a witness assertion to the courtroom, urging it to reject a restructuring plan which has secured the endorsement of Thames Water’s board.

“Successive governments have watched on as Thames Water has plunged themselves into billions of kilos of debt,” Mr Maynard mentioned.

“Thames Water is operating out of cash, it’s working in breach of its licence, it’s unable to pay its money owed and its clients are struggling for it.

“The deal the collectors are pushing for serves their pursuits solely; it’s a short-term repair on the expense of the corporate, Thames Water clients and UK taxpayers.”

Approval of the £3bn debt financing would purchase the corporate time to boost new fairness.

Along with KKR, the Hong Kong-based investor CK Infrastructure Holdings, Covalis and Fortress Water have all been linked with potential provides.

Business sources imagine that KKR and CK Infrastructure provide essentially the most credible paths to an fairness elevate, though there is no such thing as a certainty that any of the curiosity will lead to agency proposals.

The emergence of KKR’s work with advisers additionally is available in the identical month that Thames Water is required to resolve whether or not it needs to enchantment in opposition to an Ofwat ruling on its spending plans for the subsequent 5 years.

Thames Water requested permission to extend costs for purchasers by 53% over 5 years however was instructed by the trade regulator it will be restricted to a 35% enhance.

A lot of different water corporations are additionally contemplating appeals.

Final autumn, the surroundings secretary, Steve Reed, established an unbiased overview of the trade that can take a look at far-reaching reforms.

It stays unclear which of KKR’s funds is taking part within the Thames Water equity-raise course of, which is being run by bankers at Rothschild.

The agency owns John Laing, an infrastructure investor, which it took non-public in 2021.

It additionally beforehand owned South Staffordshire, one other water firm, promoting its 75% curiosity in 2018.

KKR declined to remark.