Unlock the Editor’s Digest totally free
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.
KKR has submitted a preliminary £4bn fairness bid to take a majority stake in Thames Water, because the US personal fairness agency seems to be 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, gained a vital reprieve in London’s Excessive Courtroom, permitting it to boost as much as £3bn in high-cost debt. The utility has stated Tuesday’s approval will give it respiratory room to boost billions of kilos extra in fairness from new traders.
KKR was one in every of a number of events that submitted a non-binding provide in a bidding spherical earlier this month, based on individuals accustomed to the matter. The agency supplied to inject new fairness in a deal value about £4bn, they stated.
In distinction to a few of the different bidders, KKR didn’t plan to interrupt up Thames Water or dump property to boost funds for its bid, the individuals added. KKR was additionally in search of to maintain Thames Water out of the federal government’s particular administration regime, they stated. 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 one in every of a number of events occupied with Thames Water. Others embody 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 might complicate any Thames Water bid due to the necessity to appease competitors regulators.
Northumbrian Water confirmed on Tuesday that it might enchantment to the UK’s Competitors and Markets Authority over its pricing settlement with the water regulator Ofwat. It was one in every of six water corporations, 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 prospects in and round London, practically 1 / 4 of the UK inhabitants.
Covalis’s bid has brought about friction with the utility and its advisers due to its holding of Thames Water’s lower-ranking class B bonds. Covalis had criticised the best way 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 gives topic to fuller due diligence within the second quarter of 2025, based on a letter disclosed within the courtroom proceedings. It has estimated that this second bidding section ought to take eight weeks.
Proof within the Excessive Courtroom 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 might embody US hedge funds Elliott Administration and Silver Level.
Fairness bidders for Thames Water are prone to search a partial debt writedown from the utility’s lenders to bolster its strained steadiness sheet. David Burlison, a banker at Jefferies advising the category A lenders, instructed the courtroom earlier this month that, if bidders demanded a “massive haircut” on the debt, it might be a “harder dialogue”.
