Thames Water parent company Kemble’s future hangs on a consortium of lenders that includes two Chinese state banks, a report today revealed.
Kemble said last month it would not be able to repay a £190 million loan due on 30 April without an extension to the maturity date.
According to the Financial Times, the consortium owed the money is made up entirely of foreign banks including Bank of China and the Industrial and Commercial Bank of China.
Dutch bank ING and Allied Irish are also part of the consortium said the report.
Plans for the loan to be rapid from a £500 million equity injection were scuppered last month after shareholders pulled out following a row with Ofwat.
The regulator rejected shareholder demands for huge price rises and swingeing job cuts to stabilise Thames’ financial position.
Financial restructuring specialist Alvarez has been overseeing the refinancing talks and these might see Kemble eventually being dissolved to eliminate its debts according to the report.
One hurdle to a restructuring is Thames' labyrinthine financial structure which includes six other entities similar to Kemble that are separate from the water supplier Thames Water Utilities (TWUL).
Across the group, debts are more than £18.3bn out of which £1.7bn has been issued by Kemble.
Financial agency Fitch today cut its debt rating on Kemble to just two levels above default.
Fitch cut the rating to ‘CC’ and added a default is likely even if lenders agree to a restructuring of £190 million of debt due for repayment on 30 April.
“We believe that some form of default is probable and even if lenders agree to amend and extend (A&E) the upcoming loan, it is highly likely that the agreement would constitute a distressed debt exchange (DDE) under our criteria, which would trigger a downgrade of Kemble to 'Restricted Default' (RD) on completion,” Fitch said.
According to teh agency, Kemble has £20 million of cash while its interest payments are £80-85 million a year and dividends from TWUL (if any) “will be insufficient to cover Kemble's annual interest burden going forward”.
Separately, Thames Water said its new boss Chris Weston is to meet with union leaders, who are demanding no job cuts at the embattled utility company.
Representatives from GMB, Unison and Unite will meet with the water company's boss later today as concerns grow about it slipping back into government hands.
Gary Carter, GMB's national officer, plans to ensure that "there are no cuts to workforce numbers – or terms and conditions."
He added: "Any cost-cutting measures being considered by Thames will only be a sticking plaster and will not address the root cause of the company’s problems – a lack of investment by shareholders stretching back decades."
Earlier this week, an MP said the government is ready to step in and nationalise Thames Water if the debt-laden utility provider continues failing its customers.
Robert Goodwill, MP and chairman of the Environment, Food and Rural Affairs Select Committee said the situation of Thames Water nearing insolvency was "of considerable concern".