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Thames Water faces at least £100m to pay out to cover creditors’ advisory fees, lawyers say as Britain’s biggest water company faces bid to avoid re-nationalisation and only part of the hefty bill for financial advisors.
London’s water monopoly, which derives all of its income from bills from its 16 million customers, is preparing to undergo a messy £19bn restructuring to cover the costs of lenders’ lawyers and financial advisers. are paying millions of pounds. A mountain of debt.
Thames Water internal documents obtained by the Financial Times show the company spent £25m on these “creditor advisory costs” by December, with a total fee bill of £55m by June, 2025. It is expected to reach £100 million by September 2020.
Advisors to the creditors include investment bank Jefferies, law firm Akin, DC Advisory, and Quinn Emanuel.
While it is common for companies in restructuring negotiations to pay for creditors’ advisory costs, one person close to the debt negotiations said: “This situation will become a ‘festival of fees’ for bankers, funds, advisers and lawyers. There is a danger.”
Creditors and their advisers declined to comment.
Creditors are paying around 30 consultancies and legal advisers as part of the hefty advisory fees bill facing Thames Water. These include investment bank Rothschild, which is also leading an emergency equity raise for power companies. Magic circle law firm Linklaters is advising Thames Water. LEK Consulting was brought in by Ofwat to report on the company’s progress when Thames Water was placed into special measures by the sector regulator.
The fee will further drain Thames Water’s dwindling funds. Meanwhile, customers are being asked to see their bills increase by 53% by 2030.
The power company is in the process of raising up to £3bn of emergency financing from a group of creditors, but has previously warned it risks running out of available cash soon after Christmas without urgent intervention.
The loan is subject to court approval and carries a hefty 9.75% interest rate, as well as £200m in fees and other costs, which could total more than £800m over the two-and-a-half year term.
These costs include fees of up to £105m that Thames Water will have to pay to draw on the loan, and will be paid directly to the lender on top of any fees charged by its advisers.
In a sign that these charges are putting a strain on its finances, Thames Water held a conference call last week with external advisers, including creditors, and said it would have to defer payments on some of its charges in exchange for additional charges. He explained that there is. Interest on the total amount invoiced.
Thames Water’s general counsel, Andy Frazier, said in a telephone conversation that the charges would ultimately be borne by ratepayers, according to a person familiar with the matter.
Thames Water said in a statement about the talks: “Our liquidity position remains unchanged, as announced on October 25th. Our payment terms for our usual suppliers also remain unchanged.”These terms and conditions are consistent with our financial restructuring plan. Relevant only to organizations specifically working on We remain focused on stabilizing our business and delivering better outcomes for our customers and the environment, as we aim to attract new capital into our business. ”
The utility declined to comment specifically on the creditor advisory fee bill.
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The £3bn loan is aimed at keeping Thames Water open long enough to enable it to raise billions of pounds of capital next year. But any deal hinges on how much of the bill Thames is allowed to submit, with Ofwat expected to make a decision by Christmas.
Thames Water’s senior bondholders are being advised by Mr Jeffries and Mr Akin, while the junior bondholders are being advised by DC Advisory and Quinn Emanuel. The company’s banking group is advised by A&O Sherman and Perera Weinberg.
Messrs Morris, Freshfields, Alvarez & Marsal are advising Thames Water’s parent company, Kemble, which has already defaulted on its debts. Meanwhile, Mr Lazard is supporting Ofwat in the rebuilding of Thames Water.
