Thames Water has won approval to borrow £3 billion to prevent imminent collapse, in a high-cost loan deal described by a judge as “eye-watering”.
The High Court ruled on Tuesday that the firm could press on with a crucial cash injection, even as some of its lenders and a Liberal Democrat MP said they would appeal against it.
Thames Water is England’s biggest water firm and supplies about 16 million households across London and the South East.
The company has been at the centre of growing public outrage over the extent of pollution, rising bills, high dividends, and executive pay and bonuses at the UK’s privatised water firms.
It also has at least £16 billion of debt, and had previously warned it only had enough money to keep running until March 24, when it would have fallen into a temporary nationalisation.
In his Tuesday ruling Mr Justice Leech said Thames Water should be allowed to “finish the jigsaw” and find new investors before passing the costs of nationalisation onto the Government.
The latest £3 billion, which would come in two £1.5 billion instalments, is enough to last Thames Water for a further one year.
It buys bosses more time to find a permanent source of funding, which will likely come by selling the company.
But the deal also comes with an unusually high 9.75% interest rate, plus fees, which over the 2.5-year life of the loan could result in about £800 million in extra payments to lenders, experts have said.
The loan is being provided by a group of Thames Water’s senior creditors, a group of hedge funds, banks and other big investment firms that it already owes about £11.5 billion, including Abrdn, M&G, Elliott Management and Invesco.
“The costs of finance and adviser fees in the present case are very high. Indeed, they might be described as eye-watering,” wrote Mr Justice Leech.
“This is good news for our customers, puts our business on a firmer financial footing,” said Chris Weston, chief executive officer of Thames Water.
“Importantly, this decision will support the delivery of our turnaround.”
The company’s finances remain on a knife edge, and last week it asked regulators to allow it to raise customer bills by even more over the next five years than the 35% that had previously been granted.
Liberal Democrat MP Charlie Maynard said he would appeal Tuesday’s decision, saying the £3 billion loan is not in the interests of customers and calling it a “futile, expensive, and extremely short-term bail out”.
“This restructuring is simply throwing good money after bad,” he added.
A rival group of Thames Water’s lenders also opposed the ruling after putting forward an alternative plan which they said would give the company the same amount of cash but on better terms.
Mr Justice Leech gave them the go-ahead to take their challenge to the Court of Appeal on Tuesday.
I stand by my evidence to the court that allowing Thames Water to take on £3bn more debt is not in the interests of their millions of customers. They will all be paying the price for this futile, expensive, and extremely short-term bail out. @WindrushWasp
— Charlie Maynard 🔶 Liberal Democrat (@cammaynard) February 18, 2025
A spokesman for the senior creditors providing the loan said the judgement is “ a positive step towards efforts to deliver a highly complex operational turnaround and restructuring”.
They added that allowing the company to fall into a temporary nationalisation would “undermine confidence in the infrastructure financing model which underpins much of the Government’s long-term investment agenda.”
Matthew Topham, lead campaigner at campaign group We Own It, said the deal “will keep Thames afloat in the short-term, but their underlying business model is rotten and should be condemned”.
He added: “The reason they’re getting bailed out is because they ran out of other people’s money to line their pockets with. It’s only a matter of time before they end up on the edge of bankruptcy again.”
A spokesperson for the Environment Department (Defra) said: “The company remains stable and the Government is closely monitoring the situation.”
