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KKR has submitted a preliminary £4bn fairness bid to take a majority stake in Thames Water, because the US personal fairness agency appears to place itself as probably the most credible potential proprietor of the debt-laden water supplier.
Information of the provide comes a day after Thames Water, the UK’s largest water utility, received a essential reprieve in London’s Excessive Court docket, permitting it to boost as much as £3bn in high-cost debt. The utility has mentioned Tuesday’s approval will give it respiration room to boost billions of kilos extra in fairness from new buyers.
KKR was considered one of a number of events that submitted a non-binding provide in a bidding spherical earlier this month, in accordance with folks aware of the matter. The agency provided to inject new fairness in a deal value about £4bn, they mentioned.
In distinction to a number of the different bidders, KKR didn’t plan to interrupt up Thames Water or dump property to boost funds for its bid, the folks added. KKR was additionally looking for to maintain Thames Water out of the federal government’s particular administration regime, they mentioned. It was as an alternative aiming to agree a consensual restructuring of the utility’s close to £20bn debt pile.
KKR and Thames Water declined to touch upon the non-binding provide, which was first reported by Bloomberg.
KKR is considered one of a number of events interested by Thames Water. Others embrace Citadel Water, an impartial provider of water to companies, and CK Infrastructure, a part of Hong Kong’s CK Hutchison group.
Each CK Hutchison and KKR are already shareholders in Northumbrian Water, with 75 per cent and 25 per cent stakes respectively. These holdings may complicate any Thames Water bid due to the necessity to appease competitors regulators.
Northumbrian Water confirmed on Tuesday that it could attraction to the UK’s Competitors and Markets Authority over its pricing settlement with the water regulator Ofwat. It was considered one of six water firms, together with Thames Water, to lodge such appeals.
KKR’s non-binding provide for Thames Water was submitted by a February 10 deadline in a course of overseen by Rothschild & Co. By the top of the month, it ought to have chosen bidders it believes are credible and may progress to the subsequent stage.
Different bidders included Covalis Capital, an infrastructure-focused funding fund, which in distinction to KKR is planning to interrupt up the sprawling utility. Thames Water serves 16mn clients in and round London, practically 1 / 4 of the UK inhabitants.
Covalis’s bid has induced friction with the utility and its advisers due to its holding of Thames Water’s lower-ranking class B bonds. Covalis had criticised the way in which that Rothschild and Thames Water managed the fairness bidding course of, it was disclosed in courtroom hearings earlier this month.
Rothschild is aiming for bidders to submit binding presents topic to fuller due diligence within the second quarter of 2025, in accordance with a letter disclosed within the courtroom proceedings. It has estimated that this second bidding section ought to take eight weeks.
Proof within the Excessive Court docket case revealed that Thames Water’s senior “class A” collectors had been making ready a “creditor bid” for the utility within the occasion the Rothschild course of didn’t succeed. Members in that potential bid may embrace US hedge funds Elliott Administration and Silver Level.
Fairness bidders for Thames Water are more likely to search a partial debt writedown from the utility’s lenders to bolster its strained stability sheet. David Burlison, a banker at Jefferies advising the category A lenders, informed the courtroom earlier this month that, if bidders demanded a “massive haircut” on the debt, it could be a “tougher dialogue”.
