Thames Water creditors prepare for legal fight over possible nationalisation

Investors holding the vast majority of Thames Water's debt are signaling a willingness to engage with the government on "greater public control" of the struggling utility. However, they are simultaneously preparing for a potential multi-billion pound legal fight should the company be temporarily nationalized.

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We are keen to meet new ministers as soon as possible to discuss how we can work together in the best interests of customers, including by enhancing public control of the company’s operations.

London & Valley Water (L&VW), a group of 100 institutional investors that collectively own £17 billion of Thames Water's £21 billion debt, stated they are open to government involvement. Yet, they emphasized this does not equate to public ownership. Mike McTighe, who is set to lead the company's governance overhaul if the consortium's rescue plan is approved, expressed a desire to collaborate with incoming ministers.

"We are keen to meet new ministers as soon as possible to discuss how we can work together in the best interests of customers, including by enhancing public control of the company’s operations," McTighe said. "We will work with Andy Burnham, his government and local authority leaders to rebuild confidence in Thames Water and the wider sector."

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We will work with Andy Burnham, his government and local authority leaders to rebuild confidence in Thames Water and the wider sector.

The consortium's stance comes amid reports that Prime Minister-elect Andy Burnham plans to place Thames Water into a special administration regime (SAR), a form of temporary public ownership, after taking office. This move could shift the company's operational costs to taxpayers, with creditors estimating the bill could reach £2 billion. A Burnham ally suggested that if taxpayers foot the bill, they should gain control to fix the company and ensure water supply.

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If it is going to cost the taxpayer £2bn to keep the company afloat then the taxpayer needs to receive something in return; that means control, so that we can fix the company and secure the water supply for thousands of families and businesses.

To bolster their position, L&VW, which includes prominent fund managers like Apollo Global Management and Elliott Management, has engaged top litigation firm Pallas Partners alongside Akin Gump. While no legal action has been initiated, these preparations are described as a "precautionary measure" to be ready for various outcomes, including potential nationalization.

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Creditors are assessing all potential routes that the situation regarding Thames Water may play out. They want, and need, to be ready. There is no legal action being taken at this point. This is purely a precautionary measure.