Investment bank Rothchilds is also soliciting bids to take over the company and inject much-needed funds.
The court hearing on Monday is scheduled for four days with a possible extension as a much smaller group of lenders are challenging the terms of the lifeline and proposing an alternative.
Although Thames will not collapse immediately if the deal is not approved by the judge, insiders have acknowledged that the company will move a step closer to temporary nationalisation – a so-called Special Administration Regime – if it fails.
The government has already sounded out a number of consultancies to take that on if the situation arises.
The company has been keen to stress that whatever happens, its services to 16 million customers would continue uninterrupted, but big questions about the future of Thames and other key infrastructure providers have been thrown up.
Some argue that Thames should be allowed to go bust and have the government take over the company due to it being the architect of its own misfortune. Previous owners loaded the company with debt, took out big dividends and paid executives handsomely. Caving in to its demands for customers to pay more now for a failing service would be a gross injustice.
Others say that poor regulation has allowed this mess. Bills were kept too low for too long which hampered investment in the aging infrastructure that is now being overwhelmed by a wetter climate. Ofwat is fighting yesterday’s battle and making things worse by imposing fines of tens of millions of pounds for failures, thus further depriving the company of the funds to fix the very things it is being fined for.
What Thames and ministers both agree on is that neither want this sprawling company on the government’s books. Consultancy Teneo has predicted a temporary nationalisation would cost up to £2bn a year.
However, a wider, perhaps more important argument made by some is that the failure of Thames as a private company would send an unhelpful message to the international investors that Chancellor Rachel Reeves hopes will invest hundreds of billions in UK airports, windfarms, rail links and everything else on her long shopping list of growth-boosting projects.
Sources close to the company and its creditors argue that we cannot agonise over and regulate for past mistakes. We are where we are – between a rock and a hard place. Carve out a special deal for Thames – or risk its collapse.
Thames has just over two weeks to appeal to the CMA to bump up the bills its allowed to charge. Its not without risk – the CMA could revise them down.
Last week, the chair of the CMA was forced out by ministers unimpressed by the regulators focus on growth. Thames says it needs higher bills to invest £20bn over the next five years. It will be an interesting test case for the new chair.
Source:
www.bbc.com
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