Carlyle steps in as Thames Water faces imminent collapse

Thames Water, the largest water and wastewater company in Britain, is facing a severe financial crisis, with its liquidity expected to run out sooner than anticipated. The company, which serves around 16 million customers, has seen its credit rating downgraded into junk status by two major rating agencies. In an effort to avert collapse, Thames Water is seeking to raise over £3 billion and has engaged Rothschild to explore potential investments from global funds, including Carlyle. However, many analysts doubt the success of this rescue effort due to the significant financial restructuring required, as the company carries approximately £16 billion in debt. A group of 90 funds is preparing its own rescue plan, which may involve a substantial debt-for-equity swap that could eliminate existing shareholders. The situation is further complicated by regulatory challenges, as Ofwat, the industry watchdog, has rejected Thames Water's initial spending plans for the upcoming five-year regulatory period. The company is currently in discussions with Ofwat, with a final determination expected in December. In the meantime, creditors are considering a £1 billion bridging loan, but skepticism remains regarding the availability of new financing without clearer regulatory guidance. The board of Thames Water has recently convened to address the implications of its credit downgrades and impending liquidity issues. If new investments do not materialize before the company exhausts its cash reserves, the government may have to resort to temporary nationalization through a Special Administration Regime. Thames Water has also scheduled court dates in November as part of its contingency planning for a potential restructuring, indicating that the company is exploring all avenues to secure its financial future.