Thames Water - comment

In a parallel move along with the announcement of the general election in the UK, Ofwat announced that the decision to approve the new business plan submitted by Thames Water has been postponed till after the general election. While the company has got a temporary stay of execution, there is a higher risk that the decision may be made by a government that may not be as market-friendly and chose to favour impoverished consumers over wealthy bondholders. Hence the economics of the approved business plan may reflect that. This is clearly not a positive development for bondholders as it increases the probability of a special administration over other pro-market solutions. It also makes a consensual restructuring plan more challenging as the financial projections embedded in a new business plan will be absent if negotiations commence in the near term.