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Thames Water has received preliminary equity bids from parties that include one of the US’s biggest infrastructure investors and a London-based distressed asset investor.
The teetering utility, which serves 16mn households in and around London and is groaning under nearly £20bn of debt, said on Tuesday that it had “received proposals from six parties in respect of the equity raise” through which it is seeking to raise billions of pounds to stave off collapse.
Among the six parties interesting in providing fresh equity to Thames are US private equity firm KKR, Hong Kong infrastructure investor CKI, hedge fund Covalis Capital and Castle Water, a provider of business water services in London. Those four parties are most committed to the process, according to several people familiar with the matter.
The other bidders are Stonepeak, a US infrastructure investor that manages more than $70bn of assets, and FitzWalter Capital, a London-based fund that focuses on investing in distressed debt, according to the people.
These preliminary bids are not binding and do not require any firm commitments, with some of the parties choosing to remain in the process even though they view an eventual firm bid as unlikely.
“Everyone is just hanging round the hoop seeing anything good comes out,” said one person close to the process.
Two people familiar with the matter said Stonepeak was less interested in buying Thames than KKR and CKI, the latter of which submitted a proposal indicating it would inject £7bn into the near-insolvent utility.
FitzWalter, meanwhile, was the unnamed party referred to by Thames Water as submitting a proposal “for minority equity, intended to partner with investors, and did not set out financial metrics”.
Stonepeak and FitzWalter declined to comment.
FitzWalter owns some of Thames Water’s lower-ranking class B bonds, which could sustain heavy losses under the £3bn loan deal the utility has agreed with higher-ranking creditors.
Covalis also owns some of these junior bonds. The London-based firm, which focuses on investing in infrastructure-related assets, has been highly critical of the way that Thames Water and its adviser Rothschild & Co have managed the equity raise process.
Thames Water is running perilously low on cash and is trying to seek approval from bondholders to access money from its £3bn rescue loan ahead of any potential further legal challenge to the controversial package.
The utility has said it hopes to agree terms of an equity raise by the end of June as it seeks to turn around its finances.
Aside from the six equity bidders, the utility’s higher-ranking class A bondholders have indicated they are preparing a backup creditor bid if the equity raise fails. These bondholders include US funds such as Elliott Management and Pimco.
Thames Water said on Tuesday that some of the bids also offered creditors an opportunity to invest in the utility in exchange for a writedown to the value of their debt.
Thames Water declined to comment.
