Thames Water has announced that it has entered into a transaction support agreement (Class B TSA) with certain Class A creditors and certain Class B creditors, including an ad hoc group of Class B Creditors.
Announcing the deal, the water company said Thames Water, the London & Valley Water consortium (L&VW), Ofwat and other regulators have been engaged in constructive discussions regarding the proposed recapitalisation of Thames Water for the benefit of customers, employees and the environment.
However, the Class B TSA does not impose any obligation on the company or the Thames Water group to propose a Recapitalisation - whether on any terms proposed by L&VW or otherwise.
Currently, the terms of the Recapitalisation (other than the treatment of the Class B Creditors), continue to be discussed between the company and its relevant stakeholders.
Thames Water are cautioning that:
“As engagement remains ongoing, there is no certainty that the Recapitalisation will be finally agreed or, therefore, that the Class B Terms will ultimately be implemented.”
Discussions with the company's remaining financial stakeholders in relation to the terms of the Recapitalisation are also expected to continue.
The discussions remain ongoing - at this stage, the Thames Water Board, Ofwat, other regulators and relevant investment committees have made no decision to accept and take forward any proposal from L&VW to implementation.
The Class B TSA includes certain terms for the Class B Creditors' treatment under any future recapitalisation of the Thames Water group which is supported by Class A creditors and super senior creditors who hold at least 66.66% of the Class A and super senior debt respectively.
The Recapitalisation is expected to be implemented by way of a restructuring plan - RP2.
The Class B TSA, which is legally binding on its parties, was entered into on 16 October 2026 by the company, the Consenting Class A Creditors, and Consenting Class B Creditors who hold in aggregate in excess of 60% of the Class B Debt.
“Engagement remains ongoing - no certainty that Recapitalisation will be finally agreed or that Class B Terms will ultimately be implemented”
The Class B Terms therefore remain subject to overall agreement of the terms of the Recapitalisation – Thames Water are cautioning that:
“As engagement remains ongoing, there is no certainty that the Recapitalisation will be finally agreed or, therefore, that the Class B Terms will ultimately be implemented.”
Thames Water are also warning that despite the progress that has been made on the terms and structuring of the Recapitalisation, “the company does not currently have sufficient certainty that RP2 can be implemented before certain senior debt matures and the stable platform period expires in March 2027.”
The stable platform period was introduced following the Thames Water group's interim restructuring transaction in 2025 to provide enough time to agree and implement the Recapitalisation. The water company's parent, Thames Water Utilities Holdings Ltd therefore intends to implement a further interim transaction to extend the maturities of certain senior debt instruments and the stable platform period (SPP Extension Transaction").
The company says it is in “constructive discussions with its stakeholders” about the SPP Extension Transaction, and that it remains focused on securing a market-led solution which delivers improvements for customers and the environment “as soon as practicable.”
The Class B Terms provide that in exchange for the write-off of the full c.£1 billion of Class B Debt, Class B Creditors will receive:
post restructured equity in the Thames Water group of a percentage which gives the Class B creditors a recovery of c.5.9%;
the right to participate in £150 million of any new equity contemplated by the Recapitalisation; and
5.9% participation rights in respect of certain additional tiers of new debt or preferred equity which is included in the terms of the Recapitalisation.
The Class B Terms also provide for payment of certain costs incurred through to implementation of the Recapitalisation; consent fees and a work fee for certain Consenting Class B Creditors to be paid upon implementation of any Recapitalisation.
Thames Water says it “intends to continue servicing interest payments on Class A and Class B debt in full in cash up to the completion date of any Recapitalisation.”
With regard to fees or costs, Thames Water says no fees or costs will be payable by the company pursuant to the Class B TSA unless and until the Recapitalisation happens.
“Any such fees or costs will be funded from the proceeds of the Recapitalisation and not met using customer funds.”
According to Thames Water, the Consenting Class B Creditors have agreed to support both the SPP Extension Transaction and the Recapitalisation subject to
- the Class B Terms being included in any Recapitalisation which is proposed by the Thames Water group;
- Ofwat having launched a public consultation in relation to the Recapitalisation on or before 30 December 2027.
The Class B TSA does not impose any obligation on the company or the Thames Water group to propose a Recapitalisation - whether on any terms proposed by L&VW or otherwise.
Currently, the terms of the Recapitalisation (other than the treatment of the Class B Creditors, continue to be discussed between the company and its relevant stakeholders.
Discussions with the company's remaining financial stakeholders in relation to the terms of the Recapitalisation are also expected to continue.