Thames Water bonds hit record low as directors quit en masse

Shareholder representatives leave board of stricken operating company

Thames Water bonds have dropped to a new record low as a string of directors stood down from the board of the stricken company to be replaced by restructuring experts.
The price for the riskiest bonds attached to Thames’ parent company Kemble were trading as low as 5.8p in the pound today amid fears over the future of the company, down from 12p a week earlier. 
At such a low price, the bonds signal that the market believes there is little chance of bondholders getting repaid amid a looming threat of nationalisation. The bonds were trading as high as 88p in the pound a year ago. 
The latest fall came as six directors stood down at the business’s operating company, Thames Water, which serves 16 million customers. 
They included directors from Thames’ shareholders Omers, USS, QIC, British Columbia Investment Management and Fiera Capital. A separate director representing Omers stood down from Kemble last week.
Two holding companies in Kemble’s empire have also named restructuring experts Paul O’Donnell and Nick Pike as independent non-executive directors to help advise on the forthcoming overhaul.
Last week a separate director representing Omers stood down from operating company Thames Water Utilities which serves 16 million customers.
Water regulator Ofwat is due to publish its assessment of Thames Water’s five year business plan to 2030 on June 12, in a decision expected to determine whether the business is considered viable enough to be rescued with outside investment.
The company needs another £2.5bn to keep going but if the plan is rejected, and new investors are not found, the company could fall into special administration.
The Telegraph recently reported that Ofwat is working on rescue plans for Thames Water involving the break-up of the group into smaller units.
The plan, codenamed Project Telford, could result in Thames being carved up into two smaller companies with one serving London and the other the Home Counties.
Last week Omers, Thames’ biggest investor, cut the value of its stake in the business to zero, effectively meaning the company is worthless.
Omers’ 31.7pc stake was valued at £700m at the end of 2022.
Thames has debts of about £18bn and could run dry of cash by next year.
In addition to the Kemble bonds now trading at 5.8p, the utility also has bonds attached to its operating company – Thames Water – which are considered safer.
Although these Thames Water bonds have a better credit rating, they too have fallen in price in recent weeks amid fears a restructure would force bondholders to take a haircut on their investments.
A group of bondholders owning debt in Thames’ parent Kemble has been formed to negotiate a possible settlement as part of the looming restructure. It has hired lawyers at Freshfields for advice.
Thames Water and Kemble are working with Alvarez & Marsal.