KKR & Co is seeking to cut approximately £8bn ($10.7bn) of Thames Water’s debt burden as part of a broader plan to stabilise the financially distressed UK utility, according to a report by Bloomberg citing sources familiar with the matter.
The global investment firm is currently finalising a proposal set to be submitted to water regulator Ofwat in June, forming a key component of its due diligence ahead of a potential equity acquisition. The plan, which is expected to reach completion in H2 2025, represents a significant step toward a comprehensive recapitalisation of Thames Water.
Under the proposed structure, all Class B bonds and shareholder loans – totalling around £3bn – would be written off, alongside holding company debt. Senior creditors could also face a haircut of approximately £5bn, according to the sources. Thames Water’s total debt currently stands at just under £20bn.
KKR is understood to have been selected as Thames Water’s preferred bidder following an offer to inject up to £4bn in equity, a move designed to facilitate a change of ownership and pave the way for restoring the company’s investment grade status. The recapitalisation would mark a pivotal moment for the UK’s largest water utility, which has faced mounting financial pressure and operational scrutiny in recent years.
Parallel to KKR’s efforts, other interested parties – including hedge funds Silver Point Capital and Elliott Management – are also conducting due diligence for potential equity investments. Sources say alternative proposals, including a creditor-led plan supported by holders of senior Class A debt, are expected to be submitted to Ofwat in the coming weeks.
The discussions remain fluid, with a working deadline at the end of May for the submission of proposals. However, sources caution that negotiations may extend beyond that, particularly if new equity proposals require further engagement with Class A creditors, whose consent will be essential for any restructuring plan to move forward.
While earlier media reports suggested a potential £6bn debt write-off, sources indicate the true scale of proposed losses for creditors could exceed £8bn once all layers of debt are considered. This would come on top of the roughly £5bn already written off by former shareholders.
KKR is reportedly insistent on maintaining operational control of the business, even as it remains open to co-investment from creditors. Any collaborative investment structure would be contingent on KKR holding the reins, one person familiar with the matter noted.
Earlier this year, Thames Water secured a £3bn emergency loan to avoid insolvency – capital it has already begun drawing on. However, a sustainable long-term solution will require substantial fresh equity and creditor concessions.
KKR, which has been steadily growing its infrastructure footprint, does not plan to break up or sell Thames Water’s assets should its proposal succeed. The firm’s strategy is focused on restoring operational stability and long-term value through a hands-on ownership model.
