(Bloomberg) -- One of Thames Water’s creditors is trying to offload £300 million ($386 million) of the utility firm’s senior debt.
Several dealers are marketing the bilateral loans and privately placed debt, which are split across Class A instruments with different maturities, according to people familiar with the matter, asking not to be identified discussing private information. This follows a trade of a similar size last week, when around £300 million of Class B debt — deemed riskier — changed hands, the people said. Thames Water’s spokesperson didn’t respond to a request for comment.
Trading activity for Thames Water assets picked up after the UK’s water regulator said it wants to put the firm into special measures and Moody’s Ratings downgraded its highest-ranked bonds to junk. While some are trying to sell their exposure, there are opportunistic investors looking to buy relatively cheap debt 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 between the utility and its creditors over the future of the business.
Formal talks between the company and creditors have started after a particularly difficult month for Thames Water. Regulator Ofwat put forward plans that would make it harder for UK’s largest utility to raise new equity, and rejected a proposal to hike bills by 43%. And with the Moody’s cut last week, the company may have breached the terms of its license, which requires it to maintain investment-grade credit scores from two ratings companies. It could now face fines of as much as 10% of its revenue.
Some holders looked to exit after the rating action, with single trading desks selling hundreds of millions of pounds in bonds over just a couple of days, said other people familiar with the matter.
Thames Water’s Class A bonds due in April 2027 are now quoted at 72 cents on the euro, versus 86 at the start of July, according to pricing compiled by Bloomberg. Meanwhile, its Class B bonds are priced at around 30 pence on the sterling, down from 57.
--With assistance from Jessica Shankleman.
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