Hedge funds threaten to sue Britain over Thames Water
Hedge funds that loaded Thames Water with £21bn of debt are lawyering up to stop Burnham nationalising it, as 16 million billpayers face 40% higher bills.
Sixteen million Thames Water customers face another year of record bills as the hedge funds that loaded the company with debt prepare a Thames Water nationalisation legal fight, threatening to sue Britain over any move to take it into public hands.
The London & Valley Water consortium, which holds £17bn of Thames Water’s £21bn debt, has hired litigation firm Pallas Partners to draw up a legal fight against the incoming government, the Telegraph’s Emma Taggart first reported on 18 July. The move comes two days before Andy Burnham, confirmed as Labour leader on Friday, is due to become prime minister and set out plans to bring water and energy companies under public control.
The legal fight over Thames Water nationalisation
The consortium, made up of Apollo Global Management, Elliott Management, Farallon Capital Management and Silver Point Capital, is working with restructuring adviser Akin Gump on grounds to challenge a forced nationalisation or a Special Administration Regime. A spokesperson called the move “purely precautionary” and “a last resort”, and no case has been filed. The funds are also pushing a rival £10bn rescue: £3.35bn in new equity, £6.25bn in new debt and a write-off of £9.6bn, in exchange for a four-year exemption from pollution fines and looser performance targets.
Environment Secretary Emma Reynolds has written to Ofwat objecting that the creditors’ plan places an “undue burden” on customers and delays investment, telling the regulator she is “not yet convinced” it protects consumers. Burnham has said publicly that “public ownership is absolutely an option” for Thames Water, and that “for Thames Water, that is what should be done.”
Who has paid so far
Thames Water was privatised debt-free in 1989. It has since paid out roughly £7bn in dividends, including about £2.8bn extracted during Macquarie’s ownership between 2006 and 2017, when its debt rose from around £4bn to £10.5bn. Customers have been told to absorb average bill rises of £99, taking annual charges to £535, a rise of roughly 40%. Between 2020 and November 2023 the company discharged at least 72bn litres of sewage into the Thames.
We Own It campaigner Sophie Conquest called privatisation “an ideological experiment which has failed abysmally.” Windrush Against Sewage Pollution’s Ash Smith said the government risked protecting “the position of water company owners and creditors” instead of the public interest, and clean-water campaigner Feargal Sharkey has urged ministers to seize the company outright.
What the funds are risking
Thames Water’s own modelling shows that under a Special Administration Regime, junior bondholders could be wiped out entirely and senior creditors would recover less than half their holdings, which is why the consortium is fighting so hard to keep its rescue deal alive. Thames Water’s funding runway now runs only to the end of the year, and creditors agreed on 15 July to release cash covering liquidity only to the end of August.
Wall Street funds stripped billions from Thames Water, loaded it with debt, and are now hiring lawyers to stop the public taking it back.
