KKR is preparing a proposal to cut approximately £8bn ($10.7bn) of Thames Water’s debt as part of a sweeping recapitalisation plan to stabilise the UK’s largest utility, according to sources cited by Bloomberg.

The private equity firm is finalising its proposal for water regulator Ofwat, with submission expected in June. The plan includes a full write-off of £3bn in Class B bonds and shareholder loans, as well as holding company debt. Senior creditors may also face losses of around £5bn. The restructuring aims to significantly reduce Thames Water’s nearly £20bn debt load and restore financial stability.

KKR has reportedly been named preferred bidder and is offering to inject up to £4bn in fresh equity, a move expected to support a change of ownership and help the utility regain its investment-grade rating. The transaction is slated for completion in the second half of 2025.

Other potential investors, including hedge funds Silver Point Capital and Elliott Management, are also conducting due diligence. A creditor-led proposal backed by senior Class A bondholders is expected in parallel. While end-May is the working deadline for submissions, sources suggest negotiations could extend further due to the complexity of creditor engagement.

The recapitalisation effort follows a £3bn emergency loan secured earlier this year to prevent insolvency. If successful, this would be one of the largest debt restructurings in UK infrastructure and comes in addition to £5bn in losses already borne by former shareholders.

KKR is seeking operational control but remains open to co-investment, provided it retains strategic leadership. The firm does not plan to break up Thames Water’s operations, instead focusing on operational recovery and long-term asset value.

Source: Bloomberg

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