Thames Water secures a £3 billion emergency loan to avert collapse.

Thames Water’s £3 billion emergency loan, approved today, carries a relatively high interest rate of 9.75% and is structured in multiple stages.

The company will first receive an “initial tranche” of £1.5 billion, which will provide liquidity until September 2025. Two additional tranches of £750 million each could be granted if needed, extending liquidity until May 2026. However, this is contingent on the outcome of Thames Water’s appeal to increase customer bills beyond Ofwat’s permitted levels.

The loan is provided by a group of creditors holding Thames’s Class A debt, but it faced opposition from another group of creditors holding Class B debt, which carries higher risk and less protection.

Thames Water CEO Chris Weston stated that the court’s approval of the £3 billion emergency debt package will support the company’s efforts to implement its turnaround plan.

Weston says:

“We are pleased the Court sanctioned the Company Plan.

This is good news for our customers, puts our business on a firmer financial footing and enables us to continue to invest in our network and deliver critical infrastructure upgrades for our customers and the environment.

Importantly, this decision will support the delivery of our turnaround which is underway.”

Without approval of the debt deal, Thames Water had warned it could run out of cash by the end of March.

Despite securing the loan, the company remains in a precarious position. Court proceedings this month revealed that Thames Water may require up to £10 billion in debt and equity investment to stabilize its finances.

The risk of Thames Water collapsing in the coming months remains, which could force the government to intervene and take control of the company through a taxpayer-backed special administration.

Sir Keir Starmer has consistently refused to step in, while a top restructuring expert warned last year that a state bailout could cost taxpayers up to £4.1 billion.

Thames Water chairman Sir Adrian Montague called the court’s approval of the company’s plan a “significant milestone” and emphasized its role in strengthening the company’s long-term financial stability.

“This implementation is a key step in bolstering our financial resilience, allowing us to move forward with the equity raise process, a comprehensive recapitalization plan, and the CMA appeal regarding Ofwat’s PR24 price review,” Montague said.

“Most importantly, it enables the management team to continue driving the turnaround.”