(Bloomberg) -- Bank of Montreal has sold about £300 million ($383 million) of Thames Water’s senior debt at an almost 30% discount, according to people familiar with the transaction.
The Canadian lender sold a mix of the utility firm’s senior debt, including bilateral loans and privately placed debt, split across Class A instruments with different maturities, said the people, asking not to be identified discussing private information.
The debt was sold for a little over 70% of its face value, following an auction process with a reserve price of 65%, which closed on Friday, according to a memo seen by Bloomberg News. Representatives for BMO did not respond to requests for comment. A spokesperson for Thames Water declined to comment.
Several dealers had been marketing the debt in recent weeks, with some creditors increasingly anxious to reduce exposure to the troubled utility company. The UK’s water regulator said last month that it wants to put the firm into special measures, while Moody’s Ratings downgraded its highest-ranked bonds to junk.
Single trading desks sold hundreds of millions of pounds of Thames Water bonds over just a couple of days following the rating action, while £300 million of Class B private debt also changed hands at the end of July, Bloomberg previously reported.
Still, there are opportunistic investors looking to buy the debt relatively cheaply in the hopes of making big returns. And if they build big enough positions, they could get a seat at the table during key talks over the future of the business.
The utility is now in formal talks with creditors about options to restructure its debt load. A group including BlackRock Inc. and Elliott Investment Management LP have formed a coordination committee for debt holders in the talks — as part of a bigger group that holds about £8.5 billion of Thames Water’s debt.
Thames Water’s Class A bonds due in April 2027 are now quoted at 76 cents on the euro, versus 86 cents at the start of July, according to pricing compiled by Bloomberg. Meanwhile, its Class B bonds are priced at around 32 pence on the pound, down from 57 pence.
©2024 Bloomberg L.P.
