Wall Street giants hire lawyers in Thames Water debt battle

A pair of Wall Street banking giants has hired lawyers to represent them in the escalating battle for the future of Thames Water.

Sky News has learnt that JP Morgan and Bank of America, which hold financial instruments in Thames Water’s capital structure known as swaps, have engaged Simpson Thacher to advise them on their exposure to Britain’s biggest water utility.

The size of the two banks’ position was unclear on Sunday, although one source said it was not material to the company’s overall debt mountain of more than £16bn.

A source close to Thames Water said the swap instruments were a conventional component of the financial structure of a major utility.

The swaps are understood to rank ahead of the claims of other creditor classes in an insolvency event.

An army of bankers and lawyers have been assembled to work for numerous stakeholders as Thames Water fights for survival as a solvent, privately owned company.

In recent days, a group of class B debtholders has submitted a fully underwritten proposal to provide £3bn in emergency financing to the company.

That deal has been tabled as an alternative to a more expensive financing plan offered by a larger syndicate of A bondholders.

The class B group is pushing for an extension deadline of Monday set by the rival consortium, with the class A proposal already having been endorsed by the company.

Thames Water, which has about 16m customers, is scrambling to avert the threat of insolvency and temporary nationalisation as it seeks a compromise from Ofwat, the industry regulator, over its spending plans for the next five years.

The company’s shareholders have already abandoned plans to inject billions of pounds into it, describing it as uninvestible.

JP Morgan declined to comment, while Bank of America did not respond to a request for comment.