Thames Water picks KKR as preferred partner

(Sharecast News) - Thames Water has selected US investment firm KKR to take a stake in the business, as the utility desperately works to avoid renationalisation amid eye-watering bill increases for its long-suffering customers. Britain's biggest water supplier is labouring under a £19bn debt pile and needs fresh cash.

"The company remains focused on putting Thames Water on a more stable financial foundation, implementing its turnaround plan and delivering a market-led solution that is in the best interests of customers, UK taxpayers and the wider economy," the company said in a statement on Monday.

Rocked by a series of scandals, ranging from sewage spills into rivers and streams and billions in dividend payouts to investors, Thames has also faced a barrage of criticism for landing customers with an almost 40% increase in annual bills this year despite no end to leaks and disruption. Meanwhile, the company's chief financial officer Alastair Cochran quit on Friday.

KKR, which is already a minority shareholder in Northumbrian Water, was among several companies interested in partnering with Thames. Five others expressed an interest, according to the company.

Thames said the KKR proposal includes financial metrics "which indicate a material impairment of the Class A debt" meaning repayments to senior bondholders may take a hit.

"There is no certainty that a binding equity proposal will be forthcoming as it remains subject to diligence, documentation and regulatory and other approvals. As a result, certain senior creditors continue to progress in parallel alternative transaction structures to seek to recapitalise the business," Thames added.

Two weeks ago it won approval from the court of appeal for a £3bn emergency debt bailout from its existing creditors to avoid being placed into a special administration regime, which is a form of temporary nationalisation.

Reporting by Frank Prenesti for Sharecast.com