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The British water regulator is accused of having allowed Thames Water of taking control of the hedge funds and other creditors without official transfer of property for the largest British water company.
The legal control of Thames Water has moved to creditors offering a controversial loan of 3 billion pounds sterling to the public cash service without the official approval of the ofnat, according to complaints set out in a letter to the regulator earlier this month by Charlie Maynard, a liberal democratic deputy.
The Utility Higher Creditors Include the hedge funds Elliott Management and Silver Point Capital, as well as institutional investors.
The regulator is supposed to approve any change in property control. Rather than defining narrow Thames water“Ultimate Controller” as a legal owner, the public service license with Ofwat throws it more widely as “anyone who”. . . is able to control or materially influence policy or business ”.
As a rule, this role would be fulfilled by the shareholders of the company. But Thames Water’s shares investors – which include the Omers and USS pension funds, as well as the Chinese and sovereign funds of Abu Dhabi – have moved away from the company and said that the company was “useless”.
Since then, they have written the value of their challenges to zero, withdrawn representatives of the board of directors of Thames Water and apparently play no role in its current or future management. A process is underway to try to find New equity investors.
The shareholders of Thames Water “do not now seem to have any position of control or material influence on the public service, while the Senior Bond Maintaining Group” apparently responds to this definition “, the letters of the lawyers of Maynard in Marriott Harrison have read.
The complaints come as the company awaits a key judgment of the Court of Appeal, because the rival groups of bond holders argue the emergency loan of 3 billion pounds sterling, which contributes to maintaining the strand. Without it, the company said that it would lack money at the end of March.
Tim Short, investment banker and expert in regulated financing structures, has accused the flight of a “blatant derression” of its functions which could hang on the confidence of investors in the regulatory system.
“It is clear that a change of control has already occurred because the previous control parties have moved away; However, Ofwat has allowed a situation where there is no clear property of the company or supervision of the board of directors, and no consideration of public interests, “he said.
Ofwat denies that he has made a change of control through the emergency loan. By responding to Maynard saying that Thames Water informed him in January that no change had taken place, and the regulator “continued to maintain this position being examined”.
When asked to respond to allegations, Ofwat said: “A complete financial and operational reversal to the Thames is essential. The company must continue to continue all the options to seek other equity to finance its recovery plan for customers and the environment. Our recovery surveillance regime that was introduced last year, including an independent instructor, is in place to give us surveillance. »»
A judgment of the Court of Appeal is scheduled for next week for emergency financing. If the judges reject the proposed loan of senior bonds, which is delivered with an interest rate and punitive interest costs of 9.75%, the company should be largely fell into the government Special administration regimeA form of temporary renationalization.
Cost estimates To the taxpayer if the company should fall into a Sar varying wildly. Thames Water presented a forecast of his advisor, Teneo, that the government should overcome 3.4 billion pounds sterling at 4.1 billion pounds of funding in an SAR. This highly guaranteed loan – which is Not a fury conclusion – could be completely recovered if the Thames water is then sold. The interest of the company’s debt could also be frozen under a SAR.
Maynard, who appeared at the hearing of the Court of Appeal, and others challenged the figures for Thames Water and the deputy lawyer raised questions on the independence of Teneo, since it is also a public service advisor. Instead, the Maynard team estimated that a SAR would only cost 66 million pounds sterling. Ofwat said he had not seen any evidence in support of this much lower figure.
During a first instance hearing last month about the loan dispute, the Advocate General of Thames Water, Andy Fraiser, and a senior bond adviser, David Burlison, both admitted that the highest bonds were now the “economic owners” of the public service because of his growing financial distress.
Burlison, a senior restructuring banker at Jefferies, also said that its customers – who include American healing funds such as Elliott Management – “want to have control elements” on the Thames Water.
The senior bonds said in a press release to the Financial Times: “Creditors have no property rights or governance of shares on the company. They are not the shareholders, but they work hard to help bring the business back on a lasting basis since it has no equity value and that all shareholders have moved away. »»
Thames Water said: “Our creditors are not our ultimate controllers and our liquidity extension plan has no impact on the property or ultimate control of the company, which has not changed.”
