Kemble's holding-company debt and the 2024 defaults

analysisThames Water (Kemble) Finance PLC (07516930, formerly Hackplimco (No. 120) plc, legal entity identifier (LEI) 213800S7UU2MQXYJQO60) is a subsidiary of Kemble Water Finance Limited (05819317, LEI 2138003A8GC5KL85UR35), its person with significant control since 6 April 2016 with 75% or more of the shares and votes and the right to appoint directors; the group's website says it "raises debt to fund TWUL". Kemble Water Holdings' consolidated borrowings at 31 March 2023, which include the operating group's, were £5,370.9 million of secured bank loans and private placements, £11,636.5 million of bonds and £1,045.9 million of other financing, with £207.7 million of interest payable, £18,261.0 million in all (2022: £15,421.2 million). The accounts keep Kemble Water Finance's secured loans, held under an intercreditor deed with the holding company's security trustee, separate from the securitisation, whose obligors Thames Water Utilities Holdings Limited (TWUHL), TWUL and Thames Water Utilities Finance plc (TWUF) have their own Security Trust and Intercreditor Deed. ^{1 2 3 4}

analysisAt 31 March 2023 Kemble Water Finance itself owed £943.0 million of secured bank loans and private placements: a £200.0m floating rate loan due 2025; fixed rate loans of £4.5m, £5.5m, £100.0m and £200.0m at 5.3% due 2025; a £149.8m 5.39% loan due 2026; a £190.0m floating rate loan due 2024; and private placements of £50.0m at 5.26% due 2027 and £50.0m at 5.27% due 2028. Thames Water (Kemble) Finance had issued a £400.0m 4.625% bond due 2026, carried at £398.9 million, its £175.0m 5.875% bond due 2022 being no longer outstanding. The face value of debt was £949.8 million at the Kemble Water Finance level and £400.0 million at the Thames Water (Kemble) Finance level (2022: £515.1 million). ^{1 2 3}

analysisThe two companies, described as the Kemble Financing Group, have given security by debenture over their assets under an intercreditor agreement, and Kemble Water Finance guarantees its subsidiary's secured debt; each register shows a fixed and floating security document of 7 April 2011 in favour of Deutsche Trustee Company Limited, while two Kemble Water Finance debentures of 13 October 2006 to Barclays Bank PLC as security agent were satisfied on 11 April 2011. Kemble Water Finance's prospectus of 8 January 2021 for £50,000,000 5.26% Series 4 notes due 2027 and £50,000,000 5.27% Series 5 notes due 2028 secures them on its shares in Thames Water (Kemble) Finance and Thames Water Limited, its real property, book debts and bank accounts, its rights under the transaction documents and a floating charge over all its assets. The prospectus describes Kemble Water Finance as a holding company with no material operations of its own, dependent on payments from its subsidiaries, primarily TWUL, and states that those subsidiaries are separate legal entities with no obligation, contingent or otherwise, to pay amounts due on the notes or make funds available for them. ^{1 2 3 4}

analysisHigher up, Kemble Water Holdings' 2022/23 accounts show £310.4m of 4.830% shareholder loan notes due 2031, owned by the shareholders and carried at £552.8 million after capitalised interest, and £515.0m of 8.000% convertible loan notes due 2028, carried at £493.1 million. On 28 March 2023 Kemble Water Holdings replaced Kemble Water Eurobond as issuer of the shareholder notes, whose principal had grown to £539.8 million, and lent Kemble Water Eurobond the same amount on matching terms. Two unsecured loans from Kemble Water Holdings to Kemble Water Eurobond mirror the shareholder instruments — one of an original £540 million at 4.83%, on which interest can be capitalised, and one passing on the March 2023 convertible proceeds at a 10 basis point margin — and Kemble Water Eurobond has lent £3.1 billion to Kemble Water Finance. ¹

analysisKemble Water Holdings' 2012/13 accounts state that, for the £750.0 million of debt held outside the securitised group, TWUL's dividends were passed up to fund Thames Water (Kemble) Finance and Kemble Water Finance, and that if TWUL could not pay dividends the shareholders would have to find other external funding to service those debts; Kemble Water Finance's debt included a £425m facilities agreement with The Royal Bank of Scotland plc (RBS) as agent, £350m outstanding at 31 March 2013, secured by a debenture. That year the shareholders owned, in proportion to their holdings, £310.4 million of bonds issued by Kemble Water Eurobond, counted in the group's £9,606.4 million net debt but excluded from covenants; the group treated their interest as part of the shareholders' distribution, £17.5 million of interest and £74.5 million of dividends making £92.0 million (2011/12: £34.9 million and £165.1 million, £200.0 million). The group then had £1,198.7 million of secured bank loans and £8,691.1 million of other loans, all secured except one £310.4 million loan, arranged through Thames Water Utilities Finance Limited, Thames Water Utilities Cayman Finance Limited, Kemble Water Finance and Thames Water (Kemble) Finance. ¹

analysisTen years later the directors still described Kemble Water Holdings as a holding company without material operations, mainly dependent on TWUL to generate the funds Kemble Water Finance and Thames Water (Kemble) Finance needed; they expected TWUL to keep paying dividends so that Kemble Water Finance could service its external interest and refinance a £190 million facility, while recognising the risk of a cash lock-up at TWUL and, under a severe downside, forecast non-compliance with the interest cover covenant of a £200 million bilateral facility due in July 2025. The 2022/23 accounts report the group's statutory net debt up £1,568 million to £16,347 million (2022: £14,779 million) and its regulatory capital value up £2,304 million to £18,945 million; covenant gearing was 84% (2022: 88%) against a 95.0% maximum, the post-maintenance interest cover ratio 1.1x against a 1.05x minimum and EBITDA interest cover 3.3x, and £3,550 million of new debt and facilities were completed in the year. ²

analysisThe High Court's February 2025 judgment records, on the unchallenged evidence of Thames Water's general counsel, that the ultimate shareholders provided £500 million of new equity in March 2023 and agreed to provide £750 million in March 2024 subject to conditions, but then judged the business plan for Ofwat's PR24 price review "unfinanceable and uninvestible" and declined; from April 2024 members of the Kemble group announced that they would not service their own debt and defaulted on all debt payments. The plan company's explanatory statement describes the Thames Water group as effectively ring-fenced from the Kemble group by the regulatory restrictions in TWUL's licence. ^{1 2}

analysisThe Class A creditor group of more than 100 institutions holding over £13 billion of Thames Water's Class A debt, itself a party to the restructuring, told the Competition and Markets Authority that events of default occurred in April 2024 under the financing arrangements of Kemble Water Finance and Thames Water (Kemble) Finance after the shareholders declined to provide £750 million in March 2024; those defaults concern the holding companies' own debt, not debt of TWUL. A newspaper reported on 5 April 2024 that Kemble Water Finance had issued a formal notice of default after interest on a £400m bond was not paid, that a separate £190m loan from lenders including two Chinese state-owned banks was being renegotiated, and that Fitch had moved the debt deeper into junk and called some form of default "probable". Kemble's 2022/23 accounts show the £400m 4.625% bond as issued by Thames Water (Kemble) Finance and the £190m loan as owed by Kemble Water Finance; the report does not name the lenders. ^{3 4}

analysisKemble Water Holdings extended its accounting period ending 31 March 2024 to 30 September 2024 (form AA01 filed on 25 September 2024), and its filing history through September 2026 shows no later annual accounts and no administrator or liquidator; its registered office moved on 18 November 2025 from Clearwater Court, Reading, to 3 More London Riverside, London. Kemble Water Finance also extended its period to 30 September 2024, has filed no accounts since and, to May 2026, shows no administrator or liquidator; its confirmation statement made up to 14 May 2024 was filed with updates and those for 2025 and 2026 without, and it moved its registered office to 3 More London Riverside on 18 November 2025. Kemble Water Eurobond and Thames Water (Kemble) Finance made the same extension on 25 September 2024 and the same move; Thames Water (Kemble) Finance last filed full accounts to 31 March 2023, neither shows an administrator or liquidator, and Kemble Water Eurobond filed confirmation statements with no updates on 15 October 2025 and 15 October 2026. An archived record of March 2026 shows Thames Water Limited's accounts overdue: its last were made up to 31 March 2023, and those to 30 September 2024 were due by 30 September 2025. ^{1 2 3 4 5 6}