Thames Water - comment

In a highly anticipated move, the Class A notes were downgraded by Moody’s to Ba1 (one notch into sub-investment grade). The Class B notes were downgraded to B3 with the corporate family lowering the rating to Ba2. The company’s credit outlook remains negative. Again, this was highly anticipated by market. The real question is of course the economics Ofwat will grant the company in the AMP8 or it it pulls the operating licence from the company, which would push the company into a special administration. Either way, the company is on its way to a restructuring with the Class A notes as fulcrum.