It has been revealed that the Australian investment bank Macquarie Group is among the lenders to the financially challenged utility company, Thames Water.
Macquarie, previously a shareholder in Thames Water, made investments of approximately £130 million in the debt of Kemble Water Finance, Thames Water’s parent company, during 2018 and 2020.
This position places Macquarie in a potentially pivotal role in determining the future of Thames Water, especially after Kemble defaulted on £400 million of its debt. The Australian bank is among several creditors, including two Chinese banks, Dutch bank ING, and Allied Irish Bank.
Thames Water is under pressure to repay £190 million to its lenders by the end of April. However, with its shareholders declining to inject new funds, the company is poised to miss this repayment deadline. The decision of whether to extend the deadline or push Thames Water into administration rests with these banks.
The involvement of Macquarie, as initially reported by The Times, might attract significant attention.
The bank has faced criticism for burdening Thames Water with substantial debt and for extracting sizeable dividends during its tenure as the utility’s owner. In its defense, Macquarie asserts that it invested over £11 billion in improving Thames Water’s infrastructure while it owned the company.
Bond Market Uncertainty Affects Thames Water Competitors
Bond markets are showing signs of stress among English water companies, driven by concerns over the potential downfall of Thames Water and the overall debt levels in the sector.
Since their issuance, there’s been an increase in the risk premium for bonds from this industry. Specifically, the bonds of Southern Water Services have experienced a spread of 13 basis points since March 19, and those of Northumbrian Water Finance have seen a four basis point spread since their March 22 pricing.
These developments have resulted in these water companies underperforming compared to other investment-grade entities, indicating that investors might be worried about the ripple effects of Thames Water’s troubles across the entire sector.
