Thames Water Owner Hit With Second Downgrade In Six Months
hames Water’s parent company has been hit by a second downgrade to its credit rating in six months, with Moody’s warning of “materially” increased risks that regulators will block the flow of dividends. The watchdog Ofwat is considering whether to investigate Thames for a potential breach of its licence when it paid a £37.5m dividend in October, as revealed by the Guardian last week. The cash was paid from the core operating company that serves 16 million customers across London and the Thames Valley to a holding company.
The market price of a £400m bond issued by Thames Water (Kemble) Finance, one of the key financing entities that sits above the regulated water company, hit an all-time low of less than 50p in the pound after Moody’s unpublicised downgrade on Wednesday. The dividend was part-used to service its debt obligations.
The move comes in a week in which Thames appointed a new chief executive but its chair revealed he was speaking “two or three times a week” to shareholders to “jolly them along” before their crunch decision next year on whether to inject more equity to prop up a group with overall debts of £16bn.
The regulator introduced a new licence condition in May that places stricter restrictions on dividend payments if a company is failing customers or the environment, or if its financial resilience could be harmed. Thames is among the worst-performing major water companies and also one of the most indebted, with borrowings of almost 80% of the value of its assets versus a regulatory norm of 60%. Ofwat’s demand for information from Thames on the dividend prompted the Moody’s review, even though the Kemble company’s rating was cut from B1 to B2 as recently as July. The new rating is B3, a lower level of junk.
EDIT
https://www.theguardian.com/business/2023/dec/15/thames-water-owner-hit-by-second-credit-rating-downgrade-in-six-months