Pimco, the giant bond fund manager, has offloaded hundreds of millions of pounds of Thames Water debt as the crisis-hit utility limps towards a private sector rescue deal aimed at averting the threat of temporary nationalisation.
Sky News has learnt that Pimco – run by the former Man Group boss Emmanuel Roman – has in recent weeks reduced its exposure to Thames Water’s mountain of debt by selling the majority of its holdings to fellow investors including Apollo Global Management, Elliott Advisors and Silver Point Capital.
Further details of the trades were unclear on Tuesday, although one insider said they accounted for “the bulk” of Pimco’s investment in the debt of Britain’s biggest water and wastewater treatment company.
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A source close to Pimco said it had taken advantage of a recent increase in the price of Thames Water bonds amid growing optimism that the company’s Class A creditors will be able to reach a deal with regulators and the government to keep it in private ownership.
Last month, Sky News revealed that the group of lenders which want to take control of Thames Water had pledged to the industry regulator that they would not offload the company before the end of the decade.
The Class A creditor group accounts for the bulk of the company’s £20bn debt pile.
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Pimco has had a role on the co-ordinating committee of lenders which earlier this year agreed to provide £3bn emergency loan to Thames Water to keep it afloat.
Half of that sum has already been drawn down by the company, with the remaining £1.5bn accessible to Thames Water subject to a number of conditions, which have yet to be met.
The first half of the loan provides sufficient liquidity to secure Thames’s ability to continue operating until mid-January, while the remainder would buy Thames Water enough breathing space to trade until at least next autumn.
During the summer, Sky News revealed that Steve Reed, the then environment secretary, had engaged the restructuring firm FTI Consulting to undertake contingency planning for a special administration of Thames Water.
This would entail the government taking ownership of the company, which has more than 15 million customers, and its debt being transferred – at least temporarily – to the state.
Rachel Reeves, the chancellor, is determined to avoid this outcome because of the huge constraints on Britain’s public finances.
Sources close to the process say that discussions between Thames Water’s creditors, the company, Ofwat and other regulators have become increasingly conciliatory in recent weeks.
Last week, Thames Water and Ofwat announced a further extension to their negotiations, further deferring a potential referral to competition regulators of the company’s next five-year price settlement.
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A spokesperson for the London & Valley Water consortium, which comprises the Class A creditors, said the announcement reflected “continued progress to develop a sustainable solution which will deliver improvements for Thames Water’s customers, employees and the environment”.
“We will continue to work at pace with all stakeholders with a view to concluding discussions and agreeing the terms of a transaction as soon as possible, achieving an outcome that is first and foremost in customers’ interests and avoids the unnecessary cost, risk and delay of a special administration,” the group added.
Reports suggested this month that CKI Infrastructure, the Hong Kong-based conglomerate, had reiterated its call for the government to nationalise Thames Water, describing the creditors’ plan as “a high-risk proposition”.
CKI has made a number of previous attempts to buy the company, although its interest has been criticised by a number of prominent parliamentarians sceptical about Chinese ownership of key British infrastructure.
The Hong Kong group already owns Northumbrian Water.
Pimco declined to comment.
