KKR
Published on 06/03/2025 at 07:28
By Maitane Sardon and Adria Calatayud
Thames Water said KKR pulled out of an equity raise at the U.K. utility, creating uncertainty around its plan to stay afloat and raising the prospect of nationalization.
England's biggest water company and the steward of its most famous river has been struggling for years with its debt pile. Its parent company defaulted on its debt in April last year and the operating company has been pursuing a recapitalization to shore up its finances in recent months.
The British water supplier in March said that it had selected KKR as a preferred bidder for an equity raise. It warned at the time that bondholders would have had to take losses under the private-equity firm's proposal.
KKR was expected to provide a liquidity injection, helping the embattled company manage its debt and implement a turnaround plan. Thames Water said Tuesday that KKR was no longer in a position to proceed, and that its priority access to invest in the equity raise had expired.
Thames Water didn't spell out the reasons why the New-York based private-equity giant was pulling out of the deal. KKR declined to comment on Thames Water's statement.
"Whilst today's news is disappointing, we continue to believe that a sustainable recapitalisation of the Company is in the best interests of all stakeholders and continue to work with our creditors and stakeholders to achieve that goal," Thames Water's Chair Adrian Montague said.
The company is now working to thrash out an alternative plan with water services watchdog Ofwat and other stakeholders to bring in capital to stabilize its finances, it said.
Thames Water's net debt stood at 15.80 billion pounds ($18.08 billion) at Sept. 30, the company said in December.
KKR's U-turn comes as a surprise, given the investment seemed like a done deal AJ Bell's investment director Russ Mould said in a note to clients.
"It looks increasingly like Thames Water will have to be renationalised, after US private equity firm KKR pulled out of plans to inject 4 billion [pounds] into the business," Mould said.
The government indicated all through the fundraising process that it was ready to step in and take over the utility if needed, he added.
Thames Water was privatized alongside other water-and-sewer authorities by Prime Minister Margaret Thatcher's government in 1989. The company was listed on the London Stock Exchange, but a consortium led by Australian infrastructure giant Macquarie Group's asset-management bought it in 2006.
News of KKR's withdrawal comes as an independent water commission set up to overhaul the country's water sector calls for the implementation of wide-ranging changes. The commission said clearer direction from government and stronger regulation of water companies were needed, among other recommendations to the U.K. government included in an interim report published Tuesday.
Last week, Thames Water was hit with the largest-ever fine issued by U.K. water regulator Ofwat. The fine included a 104.5 million-pound penalty for breaches of wastewater rules and a separate 18.2 million pounds fine for improper dividend payouts.
At the time, Ofwat said Thames Water's decision to make dividend payments didn't properly reflect its environmental record and its delivery performance for customers.
Write to Maitane Sardon at [email protected]
(END) Dow Jones Newswires
06-03-25 0727ET