One of many world’s largest funding companies has waded into the battle over the way forward for Thames Water, the water utility which is racing to remain afloat.
Sky Information has learnt that KKR is in talks with Thames Water and its advisers about taking part in a £3bn share sale which varieties a part of a wider recapitalisation plan.
Metropolis sources mentioned this weekend that KKR, which has greater than $550bn of belongings below administration, was amongst a handful of events which had accessed a knowledge room for potential buyers.
Rothschild, the funding financial institution, is operating a course of to boost round £3bn from the sale of an fairness stake in Thames Water, which is grappling with a debt mountain of as a lot as £19bn.
Different buyers which have expressed curiosity in buying newly issued shares within the water firm embody Carlyle and Fortress Water, the latter of which is managed by Graham Edwards, the Conservative Occasion treasurer.
International Infrastructure Companions, which is owned by BlackRock, Brookfield and Isquared are additionally reported to have lodged an curiosity, though sources mentioned that the latter two have been unlikely to play any additional position within the course of.
The disaster at Thames Water is presenting Sir Keir Starmer’s administration with a problem because the debt-laden firm makes an attempt to avert short-term nationalisation.
Insiders mentioned that KKR was “a serious player” within the fairness course of being run by Thames Water, though its final result hinges on a closing willpower by Ofwat, the trade regulator, which is due by January on the newest.
Thames Water – and different suppliers throughout Britain – needs to hike payments and is demanding leniency from Ofwat on fines for previous transgressions.
One impediment to KKR shopping for an enormous stake in Thames Water, which has greater than 15m clients, could also be its 25% holding in Northumbrian Water.
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Below Ofwat’s mergers regime, the Competitors and Markets Authority would wish to assessment the deal, though there wouldn’t be an computerized prohibition.
The share sale course of is being run in parallel to an try to boost as much as £3bn in debt financing from hedge funds and different buyers.
A battle has damaged out between the holders of Thames Water’s class A bonds, which account for the majority of its borrowings, and its riskier class B debt.
Each units of bondholders have submitted proposals to the corporate, with the category A’s arguing that theirs is extra sure and the category B’s arguing that theirs will save the corporate a whole bunch of thousands and thousands of kilos in charges and curiosity over a 12-month interval.
Thames Water has already endorsed the category A gaggle’s provide, with an preliminary £1.5bn of funding to be delivered instantly.
The category A bondholders at the moment are making an attempt to safe backing for his or her proposal inside the subsequent fortnight.
Their group, which incorporates the American hedge funds Elliott Advisers and Silverpoint, would earn within the area of £650m throughout the first yr of the financing, based on sources near the B group.
The determine is strongly disputed by sources near the category A lenders, and was based mostly on incorrect calculations, they mentioned.
One space of controversy is more likely to be any incentive plan for Thames Water bosses, led by chief government Chris Weston, as a part of a deal to present the corporate a keep of execution.
Final month, the setting secretary, Steve Reed, established an unbiased assessment of the trade that can have a look at far-reaching reforms.
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It was unclear this weekend which of KKR’s funds was taking part within the Thames Water equity-raise.
The agency owns John Laing, an infrastructure investor, which it took personal in 2021.
It has additionally owned South Staffordshire, one other water firm, promoting its 75% curiosity in 2018.
KKR declined to remark.
