Winding Up — Thames Water deal douses nationalisation fears ahead of budget

Bianca Boorer

25 October 2024•6 min read

Winding Up is 9fin's weekly newsletter, incorporating summaries and commentary from our European distressed coverage for the past week. Find out more about what we do for distressed here.

Labour will be wiping away the sweat from their brow and breathing a sigh of relief as Thames Water announced today that it struck a deal with its Class A creditors for up to £3bn in emergency financing. This comes at an opportune moment, a week ahead of the Chancellor of the Exchequer Rachel Reeves announces the government’s autumn budget next week (on 30 October).

9fin also reported that the Class B creditors have also sent their own rival proposal to the company ahead of their announcement today.

What can we expect ahead of the budget? Prime Minister Keir Starmer promised at the general election not to increase taxes on “working people”, but did not quite define exactly who those people are.

Reeves has said that she would change the way debt is measured to allow the government to fund extra investment. It expected that this measure will allow £50bn more borrowing to invest in roads, railways and hospitals. We will be watching at 9fin HQ to see how exactly she plans to massage the way debt is recorded on the government balance sheet.

One theme this week with our coverage is a collaborations with our colleagues in our New York office with cross border names Ardagh, Lycra, Veritas and Medical Properties Trust.

Ahead of Ardagh’s earnings this week, we reported on the packaging company’s bondholders extending their co-op agreement to mid-December. The earnings report on ARGID is here and Ardagh Metal Packaging is here.

US Spandex manufacturer Lycra is scheming up another priming transaction as it reaches out to private credit lenders for $350m to refinance its super senior debt. Our distressed team coordinated with our private credit team on this report.

Fresh off the press, 9fin reported a hot scoop on a name that has been on our watchlist for a while — Swiss vending machine company Selecta has selected PJT Partners to work on addressing its 2026 debt maturities.

Our LevFin team also brought us some spicy distressed private earnings with Huws Gray and SLV.

This week’s news

Ardagh — A crossholder group of bondholders in packaging company has extended their co-op agreement from October to mid-December, two sources told 9fin. The group is being advised by Gibson Dunn and Perella Weinberg Partners. Management faced a tense Q&A on its Q3 24 earnings call after it cut its FY 24 EBITDA guidance.

Essity — A group of bondholders has sent acceleration notices to Essity following a dispute over a decision to sell a majority stake in the group’s Asia business and if that counts as an event of default under its bond documentation.

Huws Gray — UK building materials marker kept building leverage in Q3 24, said 9fin sources, with both gross and net leverage now in the double digits as cashflow shrinks and the UK construction sector continues to lag. Gross leverage now stands at 11.5x, while net leverage is at 10.9x on pro forma adjusted EBITDA of £82.5m.

Intrum — The company announcing earnings that show investment and servicing income dropped and the company is adamant about moving forward with its plan to file a crossborder in-court restructuring in the US and Sweden. The 600m EUR 2025 notes yield to worst shot up this week from 39 to 47 which could suggest someone's traded out of the notes as the price now matches the longer dated debt. This could be another signal that the non-supporting group of bondholders can't block the Chapter 11 pre-pack filing. 9fin was first to report Intrum was going to file bankruptcy in the US.

Lycra — The US-based spandex maker is approaching private credit lenders and opportunistic credit funds about raising $350m, which will be used to repay its super senior debt, sources said.Price talks on the private credit deal are still early but will likely be in the range of SOFR+800bps-850bps, sources said.

Medical Properties Trust — The distressed real estate REIT forked over another $2m to Steward’s FILO lenders for the sale of some the bankrupt hospital’s Florida properties. An individual investor from Texas announced a surprise 6.2% equity stake in MPT which amounts to around a $200m investment this week.

Selecta — The Swiss company’s sponsor KKR is working with a financial advisor to explore financing options and address Selecta’s 2026 maturities, while creditors have also started to hold pitches to select legal and financial advisors, according to 9fin sources.

SLV — Ardian-owned German lighting manufacturer reported slightly better results for July 24, but concerns over Europe’s economic outlook are still casting shadows over the company. LTM July 24 EBITDA was €41.8m, implying total leverage at 5.8x (assuming June 2024’s total net debt figure of €244.5m).

Thames Water — The water utility struck a deal with its Class A creditors for up to £3bn in emergency financing and an extension to its debt due to mature next year, seeking a durable solution to its liquidity issues and to avoid nationalisation. 9fin reported the Class B bonds hired DC Advisory as financial advisor and went restricted this week presenting their own plan to the company but the distressed water company choose a deal with the Class A bonds.

Veritas — A deal is finalized with the support of Veritas cross-border creditors to restructure a multi-billion debt stack after a sale of its data protection business to Cohesity was announced. 9fin was first to report details of the final refi proposal this week. The term loan and bonds are trading close to par now.

Lateral moves

Over the pond Clifford Chance has hired David Schultz and Matthew Hinker to join their New York office as restructuring partners. Schultz has experience in representing private equity clients in complex business transactions and Hinker focuses on Chp. 11 proceedings.

Earlier this month Sidley Austin poached five partners from Latham & Watkins’s leveraged finance practice. Jay Sadanandan and Sam Hamilton will be Sidley’s Global co-heads of leveraged finance. The other partners who joined include Fergus O’Domhnaill, Joe Kimberling, and Ben Wright.

“By adding this high profile team of extremely accomplished lawyers to our Global Finance practice we have taken our premier platform for private equity clients, both in London and globally, to a new level,” said Brian Fahrney, global co-leader of Sidley’s M&A and Private Equity practice group.