Thames Water says taxpayers will have to bail it out if it doesn’t get £3bn bailout loan

Taxpayers will have to bail out struggling Thames Water if an “urgent” £3bn bailout loan is blocked, the utility told a court hearing yesterday.

In a legal showdown with creditors, Britain’s biggest water supplier said it will run out of cash by March next year and fall into insolvency unless the deal gets the green light.

The struggling company took another step toward securing the loan after a judge approved a new hearing date to continue early next year.

It is one of several hurdles the company must overcome to avoid nationalization, and the hearing came just days before the water regulator was set to make a crucial decision.

Ofwat will rule tomorrow on the extent to which Thames Water can increase customer bills over the next five years, a decision that is central to the company’s restructuring plans.

The debt-ridden company wants to charge its 16 million customers in London and the south-east 59 per cent more by 2029 to pay for infrastructure improvements.

If Ofwat rules against the company, it could derail its plans to find a buyer for the business while it seeks a separate £3bn cash injection.

Thames Water’s legal team said yesterday that without an urgent loan, the Government would be forced to step in to manage the company in a process known as a special administration scheme.

About 75 percent of first-tier creditors, including investment giants BlackRock, Abrdn and M&G, accepted the loan with an interest rate of 9.75 percent.

He would have “super-senior” status, meaning he would be at the front of the queue for reimbursement if the company went bankrupt.

And the agreement would also extend the payment dates of its debts by two years.

The loan would allow the company to survive until 2026 while management carries out a longer-term restructuring plan, a Thames Water spokesperson said.

But a group of smaller bondholders have argued that Thames Water’s plan is not in the company’s best interests.

They have presented alternative proposals that, according to the company, are not viable.

Meanwhile, campaigners gathered outside the court calling for the scheme to be blocked, saying the debt will add an extra £250 a year to customers’ bills.

Yesterday’s hearing was the first of a two-stage process to agree on the loan. A Superior Court judge will decide in February whether to approve the company’s preferred plan.

Court approval is required as the terms of the loan effectively breach Thames Water’s agreements with its existing lenders by moving its claims down the seniority list.