Thames Water Utilities Holding’s credit restructuring is being challenged in court this week, as junior creditors and LibDem MP Charlie Maynard have appealed a ruling that sanctioned a new lifeline of loans in February. The water firm’s pension trustees had approved the cramdown and new loans, without which the utility risks financial collapse in two weeks' time. 

Thames Water’s liquidity runway ends on 24 March without any new loans. The troubled firm’s pension trustees had agreed to a credit restructuring, according to the 18 February ruling, when the High Court approved the plan that would extend the final maturity dates and scheduled amortisation payments of all debt by two years and cancel all currently undrawn commitments. The plan would also see £1.5bn of new super senior funding being injected into the group, and potentially a further £1.5bn.  

In handing down his judgment, Mr Justice Leech said he gave “some weight to the fact that OfWat and the Secretary of State have not opposed the Plan and also that the pension trustees support it.”  

Thames Water has two defined benefit schemes, of which the larger one, the £1.1bn Thames Water Pension Scheme, had a shortfall of more than £150m in March last year. The March 2022 triennial valuation was overdue but was finally signed off last August, showing a combined deficit across the schemes of £475.3m, with the company agreeing to reduce this to zero by 2029. A first payment of £20m was made in August 2024. 
 

   

The company notes that its pension funds may be affected by the Virgin Media ruling, as both the Thames Water Pension Scheme and Thames Water Mirror Image Pension Scheme were contracted out from inception in 1989 to 2016 and that amendments were made during that time. After the Court of Appeal upheld the High Court ruling in Virgin Media, the Thames Water trustees began “investigating any potential impact for the scheme”, the report states.  

As the water company’s troubles reach a dramatic new level this week, protesters are planning to gather outside the court. Campaign group We Own It also wrote to chancellor Rachel Reeves on 7 March to demand that the government bring Thames Water into permanent public ownership by letting it fall into special administration. The group argues that even a £3bn cash line would not keep the company going for long, and that public ownership is the way in which water is run in other countries. 

“The longer you allow this failed company to stagger on, the worse the damage, the higher the price paid by the public and our rivers,” director Cat Hobbs wrote. 

Nationalisation would ‘keep the taps on’ for consumers but making public ownership permanent rather than temporary would likely also mean absorbing a £16bn debt pile Thames Water has built up over the years. For creditors, it could be bad news; last year, it was reported that the Treasury was drawing up plans for renationalisation that would see them taking a haircut of 40%. 

The downfall of Thames Water has shaken confidence in vital infrastructure among investors. The Universities Superannuation Scheme, one of the investors in the utility, wrote off its holding last year, saying the experience would guide its future approach to regulated assets.