Battle continues to rage over Thames Water – the tarnished UK utility with questionable provenance and international ownership – to the extent you’d think it was a trophy asset.

Today we’re taking another dip in the Thames having immersed ourselves in its murky depths mid-September for a water-loosening Friday the 13^th editorial, then peering through fingers at the equity raise efforts later that month.

As we approach the ides of November, the struggling British utility is back in the news as suitors wrangle for control of an asset many wouldn’t touch with a barge pole.

For now, let’s just refresh our memories as to who’s on the equity hook. The Thames Water shareholding (including write downs to zero, or almost zero) from earlier reporting is:

• OMERS – 31.777% – written down to zero (June 2024)
• USS – 19.711% – written down to a “minimal” amount (July 2024)
• ADIA via Infinity Investments – 9.9%
• British Columbia Investment Management Corporation – 8.706%
• Hermes GPE – 8.699%
• China Investment Corporation – 8.688%
• QIC – 5.532% – written down to zero (July 2024)
• Fiera Infrastructure via Aquila GP – 4.99%
• Stichting Pensioenfonds Zorg en Welzijn – 2.172%

Battle is being waged by the bond holders with the Class B group this week submitting a £3 billion bid at a reported 8% rate, this was to rival the Class A option charging 9.75% that has already been agreed in principle.

But there’s more on the table than just those 2.

Early next year the fate of the £3 billion super-senior rescue package that was proposed by Thames Water Utilities Limited will be decided. This would allow it to continue planned investment and maintenance of the asset, permitting it to progress the touted equity raise in spring 2025. S&P views this as a “distressed restructuring” and it has a finger hovering over the downgrade button.

One of these solutions need to be successful to avoid insolvency and temporary nationalisation – all done under the hapless auspices of Ofwat.

Meanwhile, The City will be treated to a monumental wailing and gnashing of teeth… not that wailing has been in short supply over the Thames Water debacle, while teeth have been gnashed to stubs.

I feel it in my water…

So – what needs to be done? Well, first things first, shareholders need to pull on their big boy/girl pants and acknowledge a full write-off of their equity. Face it folk. You ain’t got any skin in the game – live with it.

Perhaps that will go some way towards shifting the view that infrastructure is “safe as houses” and that – yes – there is risk (more on that in next week’s editorial).

Once the shareholders have dried their eyes, let the tug of war commence between the 2 sets of creditors as they grapple to “preserve value”. Expect the lowest blows from the non-ring fenced creditors.

It’s obvious that recapitalisation of Thames Water is essential alongside a recast of the capital structure to more sustainable levels.

This is largely the result of weak and distributed shareholder structure which results in an inability to force decisions. But decisions will have to be made as the last thing Thames Water needs is to be owned by the government.

Further, the tribulations of Thames Water will serve as a pathfinder for a number of other UK water companies that look set to follow suit.

So go on, have at it.