Thames Water - comment

The downgrade by Fitch to CCC was no surprise. Nothing has changed in what Thames Water has to do. Kemble can only service its debt from dividends paid from Thames Water. Earlier in December, the regulator was critical of the decision to pay Kemble from TW via a shareholder loan. Kemble is trying to amend and extend a £190m loan that matures in April 2024. Fitch could consider this a distressed debt exchange. Fitch is also concerned about the conditionality of the equity injection. As we have said previously, shareholders will find it hard to commit to further investments on that basis until all sides have agreed on a plan and Modelling Consultations only begin in March / Final Determinations aren’t due before December 2024.