Southern Water has been barred from issuing dividends until at least 2025 due to escalating inflation-linked debt repayments.
The utility firm revealed that its net financing expenses surged by over 40% to £278.6m in the year ending April 1, primarily attributed to increasing payments required to service its substantial debt load.
The credit rating agency Fitch downgraded Southern today, citing its diminished capability to settle its obligations.
In an attempt to maintain a “prudent gearing ratio,” which currently stands just below 70%, having increased from 65.5%, the company is seeking to garner £550m from its shareholders. The gearing ratio is a measure of a company’s debts in relation to the worth of its shares.
Southern has become the second water company to be hit by the rising interest rates in this heavily leveraged industry.
Last week, Thames Water’s CEO, Sarah Bentley, resigned as the company urgently endeavoured to raise £1bn from its shareholders, aiming to stave off compulsory nationalization.
