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Thames Water is at present spending £15mn a month on lawyers and other advisers and the eventual bill for a restructuring could top £200mn, the company’s chief financial officer told London’s high court.
Alastair Cochran disclosed the hefty fee bill on Tuesday during a crucial high court hearing, in which Britain’s biggest water utility is seeking approval to take out up to £3bn in loans from creditors to stave off an imminent cash crunch.
Cochran estimated that the total amount spent on advisers by the time it has finalised the planned loan from creditors, which include US hedge funds such as Elliott Management, would be in the region of £100mn to £120mn.
Thames Water has said that the planned emergency loan from its senior creditors is a necessary bridge to a wider restructuring, which will give it time to raise equity from new investors and renegotiate its debts.
Without the loan, Thames Water says it will run out of cash on March 24 and risk crashing into the government’s special administration regime, a form of temporary renationalisation. This process would allow services to keep running while the debt is frozen ahead of a potential restructuring and sale of the business, or a full nationalisation.
Cochran said Thames Water could spend another £90mn on fees before agreeing a more comprehensive restructuring later this year, taking the total bill to as high as £210mn.
He told the court that these fee numbers also included “reasonable costs” that Thames Water was covering for its creditors, but that the “bulk of those fees have been our own legal fees”. The Financial Times reported last year that Thames Water had forecasted it would spend £100mn on “creditor advisory engagement costs” alone by September 2025.
Magic Circle law firm Linklaters is advising Thames Water, while investment bank Rothschild & Co is overseeing a process aimed at raising equity. US law firms Akin and Quinn Emanuel are advising the rival senior and junior creditor groups respectively.
The lower-ranking class B creditors — which include credit investment firm Polus Capital Management — are looking to challenge the proposed loan from the higher-ranking A creditors, claiming that the utility has not properly considered their rival offer for a loan at a lower cost and with less restrictive terms.
Cochran also told the court that he expected the utility’s total interest bill to amount to £800mn to £900mn next year, including costs of the new loan from its class A lenders. This proposed loan carries a hefty 9.75 per cent annual interest rate, as well as further fees to lenders.
He denied that the additional costs of the new loan would be borne by Thames Water’s customers, saying any costs above those that water regulator Ofwat allowed would be borne by its creditors or new equity investors.
The finance chief confirmed the figures while being cross-examined by William Day, a barrister acting for Liberal Democrat MP Charlie Maynard, who the court has allowed to speak for the public interest and the consumer interest. About a third of Thames Water’s customer bills already went towards servicing the utility’s debt, Maynard said in a written submission to the court.
The “better and fairer course” would be for Thames Water to enter special administration, Maynard wrote.
Cochran said Thames Water believed that it was in the “best interests” of both its customers and creditors to avoid a special administration but added that the utility would “not do that at any cost”.