Thames Water, the troubled British utility, on Thursday had the credit ratings cut on its debt and its holding company’s debt by two ratings agencies, sending the value of the bonds down sharply.
Fitch Ratings cut the debt of Thames Water holding company Kemble Water Finance deeper into junk territory and said some form of default was probable, while S&P lowered its rating of the utility’s bonds.
Britain’s largest water utility has been engulfed in crisis and faces potential nationalization after its shareholders last week refused to pay up to help stabilize its finances.
Kemble has a 190-million pound ($240.79-million) loan that falls due on April 30. The company’s shareholders, which also own Thames Water, said last week Kemble would be unable to repay the debt and would ask its lenders for an extension.
“We believe that some form of default is probable and even if lenders agree to amend and extend the upcoming loan,” Fitch said in a statement.
“It is highly likely that the agreement would constitute a distressed debt exchange (DDE) under our criteria, which would trigger a downgrade of Kemble to ‘Restricted Default’ (RD) on completion,” Fitch said.
Kemble’s May 2026 bonds fell 1.4 pence to 15.127 pence, close to recent record lows.
The price of Thames Water’s November 2028 bond fell nearly 1.4 pence to around 95.13, its lowest since October, according to Tradeweb data.
Rival agency S&P said it had lowered its rating on Thames Water’s class A and B debt and assigned it a negative outlook – usually a sign that a downgrade may materialize.
“The negative outlook indicates uncertainty on additional equity investment in Thames Water that is essential to improve (its) performance turnaround plan,” S&P said.
Thames Water’s nine shareholders include Ontario Municipal Employees Retirement System, the UK’s Universities Superannuation Scheme, a unit of the Abu Dhabi Investment Authority and the China Investment Corporation.