Thames Water chooses KKR to potentially rescue its operations

Thames Water, England's largest water utility and heavily debt-stricken, has selected Kohlberg Kravis Roberts (KKR), a US private equity firm, as its preferred bidder in a bid to stabilize its finances. The decision follows a detailed assessment of various proposals received, highlighting KKR's plan for substantial equity investment that may include around £4 billion to aid in reducing over £16 billion in existing debt. With about 16 million customers relying on its operations, the company is working towards finalizing terms in the second quarter, with hopes of completing the deal in the latter half of the year. The situation for Thames Water has been dire, as it faced potential insolvency and required taxpayer-backed rescues to stay operational. Recently, Thames Water has won court approval for a loan increase of up to £3 billion, aimed at sustaining operations through to 2026. Despite this news, the company has cautioned that there is still uncertainty regarding the completion of a deal with KKR, as senior creditors are exploring alternative transaction structures to recapitalize the business amid ongoing financial pressures. Additionally, Thames Water is undergoing a restructuring process, fueled by a need to relieve its significant debt burden and restore confidence amongst its customers, taxpayers, and investors. The company has debated several proposals from various parties willing to invest, indicating a complex landscape of potential buyers. KKR, also a minority stakeholder in Northumbrian Water, had reportedly lodged a proposal that implies a significant write-down for creditors amidst extensive restructuring efforts. It is believed that KKR intends to retain Thames Water intact, avoiding asset sales or breakup strategies in financing its bid. Further complicating matters, Thames Water’s Chief Financial Officer, Alastair Cochran, announced his unexpected resignation amid these turbulent changes, reflecting a governmental scrutiny level and a rising public outcry over the company's management of water services, enforcement of pricing, and environmental impacts attributed to raw sewage being discharged into local waterways. Thus, as Thames Water seeks a stable financial future under the guidance of KKR, it continues to navigate the ongoing struggles characteristic of the privatized water industry in England.