Thames Water's restructuring plan sanctioned but appeal pending

The High Court has approved British utility company, Thames Water's restructuring plan despite strong opposition including from certain junior creditors and a Member of Parliament (on public interest grounds). However, those opposing have been granted an expedited hearing for an appeal to take place on 11 March 2025.    

Background

Thames Water applied to the Court on 10 December 2024 to convene meetings for creditors to vote on its restructuring plan (the Plan) as an interim solution to its financial difficulties to allow for a substantive restructuring later in the year. The company faced significant debt obligations and the need to ensure the uninterrupted provision of vital public services. At the sanction hearing the court was asked to consider whether to sanction either the Plan (using its cross-class cram down powers) or a rival junior 'Class B' creditor-led restructuring plan.

Decision

The Court decided in favour of sanctioning the Plan: 

• The 'relevant alternative' to the Plan was a special administration rather than the rival restructuring plan led by Class B junior creditors.
• The junior creditors would be 'no worse off' under the Plan than in the relevant alternative. 
• The plan was 'not unfair' as it was an interim plan only (with no restructuring surplus) and the junior creditors were given some rights to participate. In any event, as they would be 'out of the money' in the relevant alternative, their views were to be given little weight.
• The public interest arguments (including the higher cost of bridge finance under the Plan) were considered, but were not a reason to refuse sanction. 

The judge criticised both the high level of professional advisers' fees and the very short timeframe that had been allowed for the Plan application but nonetheless sanctioned the plan. 

The battle over this high profile and controversial Plan is not over yet, watch this space for the outcome of the appeal.

Thames Water Utilities Holdings Limited, Re [2025] EWHC 338 (Ch)