KKR drops out of Thames Water rescue deal

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Thames Water has announced that US private equity firm KKR will not proceed with a planned deal to inject billions of pounds of equity into the group, throwing the future of Britain’s largest water utility into doubt.

Thames Water had selected KKR in March as its preferred partner for an equity recapitalisation deal, under which the US firm would take over the near-insolvent utility and rescue it from the brink of nationalisation.

However, on Tuesday Thames Water said that “KKR has indicated that it will not be in a position to proceed, and its preferred partner status has now lapsed”.

Thames Water has also been discussing a backup recapitalisation plan with its senior lenders. The utility said on Tuesday that it “intends to progress discussions” on this plan with water regulator Ofwat and “other stakeholders”.

One person close to the senior bondholders said that they have already submitted detailed plans for their own deal to the regulator, including a proposed management team to run the struggling utility.

“Whilst today’s news is disappointing, we continue to believe that a sustainable recapitalisation of the company is in the best interests of all stakeholders and continue to work with our creditors and stakeholders to achieve that goal,” said Adrian Montague, Thames Water’s chair.

KKR carried out 10 weeks of intensive due diligence on a Thames Water takeover, including multiple site visits to water and waste treatment facilities in and around London.