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The group of creditors pursuing a rescue bid for Thames Water have been accused of shuffling the deckchairs on the Titanic after proposing an overhaul of the stricken utility’s board.
In a bid to stave off temporary nationalisation by Andy Burnham, the lenders said they would appoint Liz Barber, the former chief executive of Yorkshire Water, and Clive Selley, the former chief executive of network operator Openreach, as directors if they are allowed to take formal control of the company.
London & Valley Water (L&VW), a consortium of 100 institutional investors holding £17bn of the company’s £21bn debt, has also lined up Dame Bernadette Kelly, the former permanent secretary of the Department for Transport.
Mike McTighe, the corporate troubleshooter leading Thames’s overhaul, would become the new chair, replacing the incumbent Sir Adrian Montague, if Thames is able to get its £10bn rescue deal approved by the government. McTighe is the current chair of Openreach.
He said: “The challenge at Thames Water is huge. If this recapitalisation plan is accepted, we will apply full dedication as a new board, working alongside the executive team to transform the business and build a culture in which the customers and local communities who depend on Thames Water come first.”
The proposed appointments are designed to reassure the government that any commercial deal would bring with it a leadership overhaul, as Burnham’s team examines the possibility of taking the company back into public ownership.
L&VW’s announcement was criticised by the public ownership campaign group We Own It. Cat Hobbs, the director at We Own It, said: “This is absolutely absurd. A cosy stitch-up that has nothing to do with the interests of the 16 million people who depend on Thames Water. This amounts to nothing more than a reshuffling of chairs on the deck of the Titanic.”
Burnham has said there should be “greater public control” of Thames Water and previously told the Guardian this could mean nationalisation. This would probably come via placing the company into a special administration regime (SAR), a form of temporary nationalisation.
More recently the prime minister said he was “angry” after companies including Thames Water were given the green light to raise bills even higher earlier this month.
He said the companies must not be allowed to treat bill payers like a “blank cheque”, an escalation of his warnings to utility companies that he is looking at options for more government control of the sector.
The SAR proposal would transfer the costs of running the company to the taxpayer, with Thames Water claiming the bill could come to £2bn.
L&VW, which includes fund managers such as Apollo Global Management, Elliott Management, Farallon Capital Management and Silver Point Capital, has also moved to strengthen its legal position in order to be prepared if Thames is nationalised.
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The consortium has hired the top litigation and disputes lawyers Pallas Partners to work alongside Akin Gump, the law firm advising the consortium on the terms of their restructuring proposals.
The lenders have been trying to take ownership and bring Thames out of administration after a failed attempt to sell the utility to the US investment group KKR last year.
However, the creditors’ plans were thrown into doubt in June when Emma Reynolds, the then environment secretary, wrote to the regulator, Ofwat, voicing concerns about the terms of the deal.
McTighe said the 10-year plan to turn the water company around would “fix the foundations” at Thames. “It will take time to fix Thames Water, but we are committed to rebuilding trust with the customers and public Thames Water serves,” he said.
Russ Mould, the investment director at AJ Bell, said of the proposed new appointments: “The hope being that these are the sort of credible names which can inspire confidence in the company’s future in private hands.
“Such an outcome would impose large losses on creditors, who are seeking to formally take ownership of the business, having already assumed de facto control, with plans to list it on the stock market as early as 2030.”
