Thames Water - comment

We see the request from Thames Water to release £380 million of cash reserves as an opportunity for creditors (especially public market creditors) to get concessions including improved information & governance rights.  The cash burn at Thames Water is getting worse and as a result, management has engaged with existing creditors to delay a potential cash crunch by asking for consent to release £380 million of cash that are held as reserves or the benefit of creditors. The release of these reserves will require the consent of the majority of its creditors. If that does not occur, It would run out of cash by December and the company would enter a standstill. Anyway under a standstill scenario, it will automatically gain access to the £380 million reserves on top of the additional £550 million of credit lines. At the end of August, the company has £1.57 billion of liquidity, including £420 million of credit lines. In the meantime, the parallel processes for a rights issue and negotiation with creditors on a debt-to-equity swap continue. The company has also reserved dates at the High Court in November to prepare for a court-driven restructuring.