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Britain’s largest water supplier Thames Water suffered a blow on Wednesday in its fight to avoid renationalization when credit ratings firm Moody’s downgraded its Corporate Family Rating (CFR) and its safest debt rating to junk status.
The debt-laden utility is at the center of a crisis in Britain’s water sector due to huge volumes of sewage being dumped into rivers and seas and a crumbling pipe network.
Moody’s downgraded Thames Water’s CFR rating from Baa3 to Ba2, two notches in the “junk” rating spectrum.
The safest debt category, senior secured “A” bonds, were cut to Ba1, one notch below junk, while riskier “B” bonds were downgraded to B3, five notches lower.
Moody’s said the downgrade followed an interim ruling this month by UK regulator Ofwat, which said Thames would not be allowed to increase prices as it requested due to its “weaker liquidity position”.
Thames, which supplies water to about a fifth of British households and has debts of about 18 billion pounds ($23.25 billion), said in a statement it was still working with regulator Ofwat to seek new equity financing to shore up its operations. Financial status.
“Improving our financial resilience and ensuring an investable PR24 (price increase) decision is a priority for our business,” the company said, adding that it was business as usual.
However, analysts are increasingly convinced that a new government must step in.
“This almost certainly means the company will be under special administration,” said Seaport credit analyst Satish Pulle, adding that the downgrade was not surprising.
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