Thames Water says taxpayers will have to bail out if they don’t get a £3 billion bailout loan

Taxpayers will have to bail out ailing Thames Water if an ‘urgent’ £3 billion bailout loan is blocked, the utility said at a court hearing yesterday.

In a legal showdown with creditors, Britain’s biggest water supplier said it will run out of cash and declare bankruptcy by March next year unless the deal is given the green light.

The struggling company moved one step closer to securing the loan after a judge approved a new court hearing early next year.

It is one of many obstacles the company must overcome to avoid nationalization, and the hearing took place just days before a crucial decision by the water regulator.

Ofwat will decide tomorrow on how much Thames Water can increase customers’ bills over the next five years – a decision crucial to the utility’s restructuring plans.

The debt-laden company wants to charge its 16 million customers in London and the South East 59 percent more for infrastructure upgrades by 2029.

If Ofwat speaks out against the company it could derail its plans to find a buyer for the business as it seeks a separate £3 billion cash injection.

Thames Water’s legal team said yesterday that without an urgent loan, the government would be forced to step in to run the company in a process known as the special management regime.

About 75 percent of major creditors, including investment giants BlackRock, Abrdn and M&G, have agreed to the loan with an interest rate of 9.75 percent.

It would be given ‘super-senior’ status, meaning it would be at the front of the queue for reimbursement if the company were to go bankrupt.

And the deal would also extend debt payment terms by two years.

The loan would allow the company to survive until 2026 while management implements a longer-term restructuring plan, a Thames Water spokesman said.

But a group of smaller bondholders have argued that Thames Water’s plan is not in the company’s best interests.

They have made alternative proposals, which the company believes are not feasible.

Meanwhile, campaigners gathered outside the court and called for the scheme to be blocked, saying the debt will add an extra £250 a year to customers’ bills.

Yesterday’s hearing was the first in a two-phase process to agree on the loan. A High Court judge will decide in February whether to approve the company’s preferred plan.

Court approval is required because the terms of the loan effectively conflict with Thames Water’s agreements with existing lenders by downgrading their claims.