Thames Water's Board Must Decide Between Competing Bondholder Proposals

Thames Water is currently in a desperate situation financially and is evaluating options for a cash lifeline, particularly focusing on a potential debt-for-equity swap. Recent proposals from different classes of bondholders complicate the decision-making process. Class A bondholders are leading with a high-interest proposition of 9.75%, while Class B offers a lower rate of 8% with upfront cash of £3 billion. The board's challenge lies in navigating the competing interests of these bondholders, both of whom aim to secure their positions in the debt-for-equity restructuring. It's crucial for Thames to consider the implications of sticking too closely to any one proposal, especially given that the terms of these arrangements can significantly affect the company's future financial health. Approval from 75% of each class of creditors is necessary for any deal to go through, and with Class A debt trading around 70p in the pound compared to Class B's 15p, the board is under pressure to make a tactical choice. Generating competitive tension between the bondholder groups may yield better terms. Ultimately, Thames Water's board must make a calculated risk assessment to avoid unfavorable terms while securing the funds needed to stabilize the company’s finances in this dire situation.