The 2025 restructuring plan

analysisIn March 2023 the group's ultimate shareholders provided £500 million of new equity and agreed to provide £750 million more in March 2024 subject to conditions, which they declined to provide, considering the conditions unmet. Advised by Rothschild & Co, Thames Water Utilities Limited (TWUL) announced on 9 July 2024, after Ofwat's draft determination, that it would approach potential investors and creditors to raise equity. On 12 July 2024 a deterioration in forecast financial ratios caused a trigger event under the financing documents, after which the group could take on no new debt beyond drawings, extensions and rollovers of existing facilities. On 20 September 2024 TWUL reported liquidity of £1.57 billion at 31 August 2024 — £1.15 billion of cash, £0.38 billion of it held in required reserves, and £0.42 billion of undrawn Class A and Class B facilities — plus £0.55 billion of reserve liquidity facilities usable only in a standstill, and said that without creditor consent its available cash would run out at the end of December 2024. ^{1 2}

analysisThe earliest maturing Class A debt was TWUL's US$285 million Class A senior notes (the US PPNs), due on 22 March 2025, with £209 million of principal and £15 million of interest payable on 24 March 2025. Non-payment would be an Event of Default starting a Standstill Period, in which NatWest Markets plc, as Standstill Cash Manager, would take over the group's bank accounts and could pay some operating and capital spending but not enhancement capital expenditure. ^{1 3}

analysisTalks between the group, Jefferies and Akin Gump (advisers to the ad hoc group of Class A creditors) and members of a separate Class A group produced the October STID Proposals (proposals under the Security Trust and Intercreditor Deed, or STID), a Transaction Support Agreement and a Class A Backstop Agreement underwriting new money, all dated 25 October 2024. Class A waivers released over £400 million of restricted cash, extending the liquidity runway from December 2024 to March 2025, and let the group start the plan. Hedge providers and Class A and Class B holders who acceded were entitled to consent fees of 0.75% (by 11 November 2024) or 0.5%, payable as non-interest-bearing notes, loans or deferred fees at the end of the stable platform period. By 10 December 2024 the agreement had been signed by 90% of Class A creditors by principal and make-whole amounts and 91.09% by the balance of Class A debt, but by only 7.4% of Class B creditors. ^{1 2}

analysisThe ad hoc group of Class B creditors, advised by Quinn Emanuel, sent an alternative interim financing proposal on 22 October 2024 and, on 7 November 2024, a Class B Backstop Agreement between the plan company (TWUL's parent, Thames Water Utilities Holdings Limited, or TWUHL), TWUL, Thames Water Utilities Finance plc (TWUF) and backstop parties, with Kroll Issuer Services as lock-up agent, to provide all the new money. Around 17 October 2024 Jefferies and Akin Gump had stopped acting for Class A members who also held Class B debt, having identified a conflict of interest. Polus Capital Management, a Class B group member, held £77 million of Class A and £206 million of Class B debt, and Covalis Capital, which submitted an indicative equity bid on 5 December 2024, was a Class B backstop party. On 24 January 2025 the Class B group's solicitors issued a claim, in the name of Westonbirt Fund LP, for an alternative creditors' plan (the B Plan), the Class B group then holding 75% of the Class B debt; the same day TWUL launched a fallback STID proposal (the Reinstated Plan) in case the plan company's plan was not sanctioned. ¹

analysisIn evidence for the B Plan, the Class B group's solicitor compared the two offers: the Class A-backed plan gave £1.5 billion committed and £1.5 billion uncommitted for 2.5 years at 9.75% interest with a 3.0% original issue discount and a 3.5% backstop fee, total fees and interest of £327 million and a cost of debt of 22.5%; the Class B alternative offered £3.0 billion committed for one year (extendable to 15 months on an appeal to the Competition and Markets Authority) at 8.00% with a 2.0% discount, £169 million of fees and interest and a cost of debt of 11.5%. The figures are the Class B group's own comparison for a plan that was not sanctioned. ¹

analysisOn 10 December 2024 TWUHL applied under Part 26A of the Companies Act 2006 to convene meetings of its finance creditors on a plan to provide bridge funding pending a more substantial restructuring. On 17 December 2024 Trower J ordered seven meetings ([2024] EWHC 3310 (Ch)), finding that TWUHL faced financial difficulties affecting its ability to continue as a going concern that the bridge finance was meant to mitigate; the class comparator was a special administration of TWUL with ordinary administration of the other group companies, and he stressed he was not considering the plan's merits or fairness. On 21 January 2025 he refused permission for expert economic evidence on competition law ([2025] EWHC 84 (Ch)). ^{1 2 3}

analysisThe plan covered £550 million of undrawn liquidity facilities; Class A debt of about £14.747 billion at the end of March 2024, in more than 60 issues, all borrowed or issued by TWUL or Thames Water Utilities Finance plc; about £1.366 billion of Class B debt from the same two companies; interest-rate and index-linked hedging with a mark-to-market value of about £1.7 billion and currency hedges; and about £3.4 billion of subordinated loans owed by TWUHL to its parent Thames Water Limited. TWUHL, a holding company with no employees and no material assets beyond its shares in its subsidiary, guarantees TWUL's and TWUF's obligations, TWUL and TWUF guarantee each other's, and TWUHL has a deed of contribution with them for the secured debt; total external non-hedging debt was about £19 billion at 28 November 2024. ^{1 2 4}

analysisThe plan, the Interim Platform Transaction, extended the final maturities and scheduled amortisation of the Class A, Class B and subordinated debt by two years, so that the earliest extended maturity falls in March 2027, cancelled all undrawn commitments and temporarily suspended a number of covenants until that maturity. It provided £1.5 billion of super senior funding with room for £1.5 billion more: a new TWUL subsidiary, Thames Water Super Senior Issuer plc, issues bonds and a term loan maturing two and a half years after first funding, at a 3% discount (a price of 97%) and 9.75% cash interest paid semi-annually, sharing the existing security, guaranteed by TWUL and TWUHL with a cross-guarantee from TWUF, open pro rata to all Class A and Class B holders and ranking ahead of all existing plan debt except certain hedging. TWUL borrows the proceeds under a loan agreement with the issuer and Kroll Trustee Services Ltd as security trustee, on a monthly schedule from £293 million in February 2025 to £112 million in August 2025. ^{2 4 5 6}

analysisThe last two tranches of the initial loan, £462 million due on 31 July and 31 August 2025, and the £1.5 billion accordion were payable only if the June Release Condition was met by 30 June 2025: a lock-up agreement for a recapitalisation through a restructuring plan, signed by holders of at least two-thirds of the super senior funding and of the Class A debt. TWUL may request accordion increases on no more than two occasions of up to £750 million each. Each obligor must keep at least two independent non-executive directors with restructuring experience — Aidan de Brunner and Neil Robson at the restructuring date — whose replacement, and that of TWUL's chief restructuring officer, needs the super senior security trustee's consent, and a request for a CMA redetermination of the final determination needs a majority of TWUL's directors and each of these nominated directors. ^{2 4}

analysisAt the meetings on 21 January 2025 the plan won 100% of those voting in the liquidity facility, interest-rate and index-linked hedge and currency hedge classes, 98.06% of the Class A make-whole class and 98.99% of the other Class A creditors; 15.5% of Class B creditors voted for and 84.49% against, and Thames Water Limited, TWUHL's parent and the only member of the subordinated class, voted against, so TWUHL asked the court to impose a cross-class cram down. Leech J heard the sanction application on 31 January and 3–7 February 2025. The ad hoc Class A group and a group of bank creditors supported the plan; the Class B group, Thames Water Limited and Charlie Maynard MP, representing the public interest and customers, opposed it, and the pension scheme trustees wrote to the court on 4 February 2025. The court held that Mr Maynard, who said he had the support of 25 MPs and 34 campaign and recreational groups and later of members of the House of Lords and 43 parish councils or councillors, landowners and businesses, had standing, and granted him a prospective costs order. ¹

analysisThe plan company's evidence came mainly from Andrew Fraiser, general counsel and company secretary, who joined in March 2024, and Alastair Cochran, TWUL's chief financial officer since September 2021 and not a TWUHL director. The judge said it was not for the court to attribute blame for the group's position, but that he would have been more confident with some evidence of introspection about how the group got there — no criticism of the two witnesses personally. In a letter of 28 January 2025, copied to the court, Ofwat's general counsel said Ofwat would not attend, had found no change of Ultimate Controller in the finance documents, had consented only to the elements needing its consent and did not object to either the company's or the alternative plan; if TWUL's board concluded it could not pay its debts and asked Ofwat to petition for special administration, Ofwat would likely apply for special administration on the ground of inability to pay debts under section 24(2)(c) of the Water Industry Act 1991 with the Environment Secretary's consent, would likely accept the board's view if other funding was exhausted, and could apply promptly under its contingency planning. ¹

analysisThe Class B group first argued that the plan company was breaching Conditions P2, P6 and P10 of TWUL's licence, then withdrew that objection. Its main case was that the Class A Control Terms, and particularly the June Release Condition proposed by the Class A group, gave the Class A creditors control of the recapitalisation and the bidding for it, in breach of the Chapter I prohibition of the Competition Act 1998 — an unlawful means conspiracy it likened to bid-rigging — to the Class B creditors' detriment; it also objected to the width of the releases for directors and advisers in clause 16 and argued that deferring the £200.4 million principal of the US PPNs would have sufficed. After the evidence closed, Covalis Capital wrote on 6 February 2025 that reports it had seen appeared to raise questions about who might control or materially influence Thames Water. Mr Maynard focused on cost: £443 million of the first tranche would return to plan creditors as interest and costs, against £65.93 million if the government provided the same funding in a special administration. The Class A group's financial adviser answered that, as the economic owners of the group, the Class A creditors should have controls over the equity raise and "a seat at the table". Leech J found no evidence for the bid-rigging allegation and was not satisfied that any Class A Control Term was unfair or unreasonable; the objections were rejected. ^{1 2}

analysisThe court accepted the plan company's valuation expert, who put TWUL's enterprise value at a mid-point of £14.729 billion (range £13.674–15.844 billion), cross-checked against the trading prices of its debt, and rejected the Class B expert's £21.496 billion; it found the group's enterprise value likely to be £16.707 billion at 30 September 2025 and £18.756 billion at 31 July 2026. TWUL's Class A bonds traded below face value, and only one £250 million Class B bond was publicly traded, the other £744 million of Class B instruments being untraded. On that valuation, value would break in the Class A principal claims in a special administration, the Class B creditors would receive nothing, compared with £0.4 billion of cash interest under the plan, and Thames Water Limited's subordinated debt nothing, so neither would be worse off under the plan. ^{1 2}

analysisIn his judgment ([2025] EWHC 338 (Ch)) Leech J found that if the plan were refused TWUL's directors would most likely ask Ofwat and the Environment Secretary to seek a special administration order and TWUL would enter special administration on or before 24 March 2025; that, not the B Plan, was the relevant alternative. The plan was not unfair to the Class B creditors and did not infringe the Chapter I prohibition: without the June Release Condition, issuing a claim for a second plan would itself be an Event of Default, and releasing restricted cash or waiving defaults already needed a Class A majority. He accepted that the Class A creditors could exert some control over a second plan, found no evidence of bid-rigging, and warned that the court would not sanction a later plan if they manipulated the bidding, for example by pressing for a low credit bid to keep the Class B creditors out of the money. The clause 16 releases were not a blot on the plan, no breach of duty by the directors having been alleged. Taking account of the public interest in uninterrupted vital public services, he sanctioned the plan, and the order under section 901F was made on 21 February 2025. ^{1 3 4}

analysisThe judge called the costs of finance and adviser fees very high, "eye-watering": well over 50% of the £1.388 billion of scheduled loans in the first six months would go back to the creditors who advanced them. The funding was issued at a 3% discount (£45 million) with a 3.5% backstop fee (£52.5 million) and 9.75% interest, and TWUL's chief financial officer accepted that about £800 million of the £1.388 billion would go on finance, debt service and professional fees — £445 million of finance costs, up to £245 million of existing interest and about £210 million of professional fees — leaving under £600 million for the gap between operating cash flow and investment, and that the penalties Ofwat then proposed were unfunded. The judge rejected the company's estimate that a special administration would cost £3.35–4.01 billion but accepted that its costs would likely equal or exceed those of this plan and a second one, found it likely that the Class A creditors would take a significant haircut in the second plan and so bear the price of the new debt, and sanctioned the plan on that basis. ^{1 2}

analysisThe Class A group's financial adviser told the court that the Class A creditors — more than 100 institutions — were the "economic owners of the business", a characterisation in evidence rather than a finding about control; Ofwat concluded in September 2025 that no creditor or creditor group could exert material influence over TWUL amounting to Ultimate Control. The judge accepted that restructuring TWUL's balance sheet to attract an investor able to restore an investment-grade rating carried a significant risk that some Class A and Class B debt would be written off, for which the adviser gave figures of £6 billion to £10 billion, and that a recapitalisation would likely trigger the licence's change of control provisions and need Ofwat's consent. ^{1 5}

analysisKington S.à r.l. (on behalf of the Class B group), Thames Water Limited and Charlie Maynard MP appealed. The Court of Appeal (the Chancellor of the High Court, Sir Julian Flaux, Lord Justice Zacaroli and Sir Nicholas Patten) heard the appeals on 11–13 March 2025 and dismissed them on 17 March 2025 with one amendment: the releases and covenant not to sue in clauses 16.1.2 and 16.1.3 were to exclude claims that a special administrator of TWUL or an insolvency office-holder of TWUHL might later bring against directors or advisers, because both companies would remain insolvent after the interim plan. It gave reasons on 15 April 2025 ([2025] EWCA Civ 475). Mr Maynard's application for permission to appeal further was refused by the Court of Appeal and, on 30 July 2025, by the Supreme Court, ending any further appeal. ^{1 2 3}

analysisThe plan took effect on 25 February 2025: every debt maturity moved out by two years and all revolving credit facilities were cancelled or converted to term loans, the original maturities returning if, among other things, the group regains two investment-grade ratings. Lenders received zero-coupon consent fee debt with a face value of £123.6 million. TWUL and TWUHL created charges that day, registered in March 2025, and TWUHL filed the plan with the registrar on 6 March 2025. Because the plan was under appeal, the super senior conditions precedent were unmet and creditors waived them three times, permitting drawings of £350 million in March and £365 million in April 2025; £715 million was drawn in April and May 2025 and lent to TWUL. Under a turnover agreement with Class A lenders covering a successful appeal, TWUL paid a £32.0 million fee into escrow on 15 April 2025, and £32.2 million with interest came back on 4 August 2025 after the Supreme Court refused permission. TWUL kept drawing from Thames Water Super Senior Issuer in 2025 and January 2026, and from March to July 2026 on the first £823 million accordion tranche, about £2.25 billion of principal in all by TWUHL's 2025/26 accounts. ^{3 4 5 2}