LONDON (Reuters) – Thames Water, the heavily-indebted British utility facing a funding crisis, could see its debt downgraded if its shareholders do not commit to injecting new funds into the company, ratings agency S&P Global said on Friday.
S&P said the abrupt resignation of Thames Water’s CEO this week could hinder efforts to address its operational problems, jeopardising 1 billion pounds ($1.27 billion) of shareholder equity needed to fund a turnaround.
It said it had placed its “BBB” and “BB+” issue ratings on Thames Water’s class A and class B debt on CreditWatch with negative implications.
S&P said it could lower the ratings by one notch “in the
absence of sufficient clarity on the management transition and timing of additional equity support from shareholders”.
The price on some of the bonds issued by Thames Water fell by as much as 3.6 pence on the pound, according to Tradeweb data.
Britain’s biggest water company is struggling with 14 billion pounds ($17.8 billion) of debt while failing to tackle its poor customer and environmental performance, including stemming the flow of raw sewage into rivers.
The government is preparing to step in if necessary as concerns about its financial viability mount.
The company appointed corporate veteran Adrian Montague as it new chairman on Thursday.
Montague said in a statement he would work with the board, regulators and investors to focus on the “company’s turnaround plan and its future financing needs”.
The company’s management had previously asked shareholders, which include Ontario Municipal Employees Retirement System, the UK’s Universities Superannuation Scheme and China Investment Corp, for 1 billion pounds of equity to strengthen its balance sheet.
($1 = 0.7862 pounds)
(Reporting by Paul Sandle and Chiara Elisei; editing by David Evans)
