Thames Water Utilities Limited has responded to yesterday’s downgrading by Moody’s Ratings.
Moody’s is a New York-based company which rates the creditworthiness of companies, governments, and fixed income debt securities.
The rating system ranks from Aaa to C, with Aaa being the highest quality and C the lowest quality. Yesterday Moody’s downgraded Thames Water’s corporate family rating to Ba2, its Class A debt rating to Ba1 and its Class B debt rating to B3, placing Thames into their ‘high credit risk’ or ‘substantial credit risk’ categories.
Explaining their decision, Moody’s said:
“Moody’s Ratings has downgraded to Ba2 from Baa3 the long-term corporate family rating (CFR) of Thames Water Utilities Ltd. (Thames Water). Concurrently, we assigned a probability of default rating of Ba3-PD. We have also downgraded the backed senior secured debt ratings of Thames Water’s guaranteed finance subsidiary Thames Water Utilities Finance Plc (TWUF) to Ba1 from Baa2 and its backed subordinated debt ratings to B3 from Ba3.
“Thames Water’s outlook remains negative, reflecting the increased likelihood that (1) the final determination expected later this year would deter existing or new shareholders from providing sufficient additional equity during the next regulatory period to allow the company to deliver its investment programme; and (2) in the absence of a pathway to future equity support, existing lenders may be reluctant to provide the company with the required flexibility to improve its immediate liquidity runway by raising new debt.”
In response, Thames Water issued a statement on the company’s website:
“Thames Water Utilities Limited (“TWUL” or the “Company”) notes the rating downgrades published today by Moody’s Ratings (“Moody’s”). Moody’s has downgraded its corporate family rating (“CFR”) to Ba2, Class A debt rating to Ba1 and Class B debt rating to B3. All these ratings maintain a negative outlook.
“TWUL alerted Ofwat to the possibility of potential credit rating downgrades in April 2024 and continues to work with Ofwat to maintain the ongoing financial resilience of the business. Management is engaging with investors and its creditors and remains committed to seeking new equity funding and exploring all options to extend its liquidity runway.
“Increasing our financial resilience and securing an investible PR24 determination is a critical priority for the business. In the meantime, it’s business as usual for our customers and our teams on the ground who will continue to supply our services and remain focused on the delivery of our turnaround plan.”
