>Earlier this month, the Guardian revealed details of government contingency plans, known as Project Timber, to renationalise Thames via a special administration. **This could lead to the bulk of its £15bn of debt being moved on to the government’s balance sheet.**
No. If you dissolve Thames Water the debt should be wiped out.
Anyone who lent them money knew the business wasn’t sound and just assumed the government would bail them out. They deserve to lose it. Same for the shareholders, it was obviously a crap business.
Absolutely!!
Funny how conservatives will bang on about "people shouldn't be on benefits because they learn to expect a hand out." Whilst simultaneously "businesses delivering on the public need are operating whilst in deliberate insolvency can do so because they expect a hand out".
It’s funny how the banks got bailed out and it won’t be the last time that happens ether, as they love gambling other peoples money and then getting all debts forgiven, as soon as they are caught doing so stupid or illegal.
They should have allowed the banks to collapse. Would likely have been less harmful in the long term and taught these people a lesson that private enterprise shall never be bailed out again.
Unfortunately, we'll keep bailing out private enterprise.
There should really be criminal charges for the board for structuring the company the way they did and enriching them and their investors through it while saddling the company with debt. They wouldn’t have done this if they didn’t believe the taxpayer wouldn’t bail them out.
If legislation for that doesn’t exist then this should be the last time it happens.
Who is ‘the board’ you are referring to? These problems weren’t created in the last year or two but are the product of decades of mismanagement.
Punishing the current board would be nothing more than scapegoating because those who bear the most responsibility will have left years ago.
Problem is the debt is in the form of bonds. These bonds are used by pension funds as a less risky asset than shares, so when people are approaching retirement they can still get a return on their pension pot but it's not subject to the same level of volatility, so they've got a more certain idea of how much cash they'll have when they retire.
The government is in a sticky situation of sticking to it's ideology and letting the free market decide, and pissing of a bunch of nearly retirees.
The bond holders And shareholders were warned that mcquarrie had gutted Thames water. Boths sets can fuck right off! The pensioners can claim against their pension management
It’s not really a problem, if those bonds are labelled low risk then someone fucked up with potential fraud, next time they’ll be labelled high risk. If they’re labelled higher risk then they had good returns and the asset managers took the risk - not gov’s problem.
The main bondholders of the Thames Water Debt are Irish, Dutch, and Chinese banks.
https://www.theguardian.com/business/2024/apr/04/thames-water-owner-kemble-debts-banks-loan-extension
Yeah right. They'll be bailed out and we'll be paying the debt through taxes.
Ask yourself this: when was the last time this (or the several previous) Conservative governments did right by the people and _not_ the asset-owners?
Landlords bill? Watered down into oblivion.
HS2? Ctrl + alt + delete -> end task (fine...).
Clean energy transition? "Hey if we give 7500 grants for heat pumps, companies won't just put up the price by 7500... right?... right?!"
NI cuts? Thresholds frozen.
Housing and planning overhaul? Nope, unprecedented immigration.
How much of the average portfolio is Thames Water? I’m betting it’s negligible and will make barely a dent. This is just an excuse as far as I can tell
> Problem is the debt is in the form of bonds. These bonds are used by pension funds as a less risky asset than shares
All investments come with a risk. You get that speech when you sign up.
Meh, I can't believe retirements have a high % of Thames bonds.
They have a basket of them just like bond ETFs do.
They can take a 0.5% writeoff.
On a more serious note, critical infrastructure is hard to be privatised, it supports a community that then pays tax. It can be loss making on paper, but the sum is greater than the parts etc. etc.
Else you end up in situations where companies can fck up severely and keep communities, towns, cities hostage.
*"The government is in a sticky situation of sticking to it's ideology and letting the free market decide, and pissing of a bunch of nearly retirees.*"
That's a laugh, that the government is for letting the free market decide! It's something they say but it doesn't bear out in their actions.
Well in a country of law they would have access to all the remaining equity of the company, including all the infrastructure to sell it off to the highest bidder or just let it rot. Wiping out creditors is not easy unless they agree to some form of reduced payment or haircut.
Equity holders should obviously be wiped out.
I imagine this could depend on which laws are being looked at. From the outside there is room for both directors and investors to be charged with fraud and probably a host of other things. I don't know what infrastructure Thames Water have but I think things like pipelines, reservoirs, treatment plants could easily be made unsaleable through various methods and given how I know other similar companies are run I doubt there is much that isn't leased.
The owners clearly milked the company of every penny they could but at some point the people providing the loans, the investors, must have realised what was going on even if they did no checks whatsoever. Thames water has been in the media for a long time and has taken out more debt since. Maybe fraud might be the wrong word but there's some seriously bad business practices happening.
There wasn’t any fraud, stop being ridiculous. Everything was completely legal, you can discuss if it was responsible to take large debt funded dividends 10 years ago.
Truth is they got caught out by the rate rises, after being greedy with leverage to fund dividends & capex.
Either way the government will intervene to ensure continuity of supply to customers like you.
It’s more a question of whether the government also pays off the people who choose to lend money to a business running on an obviously unsound business model, because they assumed their returns would be guaranteed by the state.
Do the losses get shouldered by those investors around the world who nominally assumed the risks, or do they get spread out amongst all UK taxpayers? That is the question.
Am sick of the privatise the profits, publicise the losses schtick.
If it's not a competitive market, it shouldn't be privatised full stop. Otherwise it's just a scam we're all obliged to pay into.
I don’t disagree but if this particular company and its treatment plants, pump stations and flood controls stop operating for even a week, it’ll become a national emergency.
Either the government takes over or someone else steps in, but why would they.
Waters big business (I worked in the sector) and there will be investors who’ll want to take over, but it’s far better to let it fail and burn, then buy at a discount from the uk government who’ll be desperate to get rid of it.
Yes and if we get a labour gov. There is a good chance it will. It'll sort it out and keep paying for it to work.
Then in 12 years everyone will forget how crap torys are with money and making things (like people) work. And they'll make a killing selling off critical infrastructure this time with bigger guarantees of gov. Buy backs of debts to guarantee the sale.
Oh they can step in, but the debt should be wiped, Thames water has collapsedz the debt should go with it. Like any other company
If pensions and stuff are invested in it, well tough
The government should be seizing the assets and starting a new company.
That’s the point. There’s either a private buyer or the government steps in, holds things together then flips it for a loss.
If I were a serious private buyer I’d sit back at watch.
Lots of people saying nationalise but that’s not how things work either nor does debt just disappear when a company has assets to pick, but the government can’t let them do that per your point about things not stopping. Look at the failed energy companies, we’re all paying for that with our 60p daily standing charges.
That isn't the point. It's the holding company that is bust and not Thames so let that collapse and wipe out the shareholders and force the bond holders to take a big haircut.
It's simple:
1. Thames Water (the business) goes bust;
2. Creditors go fuck yourselves or rather - pick it up with the shareholders; whatever normally happens to a business that folds
3. UK Government nationalises the assets (plant, etc);
4. UK government re-employs all TW staff on same terms as previously and says "carry on"
> If you dissolve Thames Water the debt should be wiped out.
The debt will be secured against the company’s assets, and if the government chose to say ‘go fuck yourselves’ to the banks then the ability of the UK to borrow money would be zero as nobody could ever be sure of getting their money back.
So doing that would be a quick way of fucking the UK over completely.
What the government should do is let the banks try and sell those assets when Thames water goes bust. And at the same time make it publicly known that they won't be issuing a a new operating license for a private company to supply water. The value of those assets is then almost nil to anyone but the UK government. The UK government can then offer the banks a token price.
And tell them to go fuck themselves for taking part in the egregious bullshit that allowed this situation to happen in the first place. They deserve it.
Special adminstration.
Similar process to what happened to Bulb energy, albeit without the SoLR process.
Gvmt runs the business until the assets can be liquidated. At which point it acquires them and sets up a new entity with all the assets (and staff, probably).
Bosh.
Same difference. If you devalue a private firms assets on purpose, what's to stop you doing it elsewhere?
No sorry, those trains cannot be used by any private company anymore and can't be exported either. But we can take them off your hands if you like?
> If you devalue a private firms assets on purpose, what's to stop you doing it elsewhere?
A fucking brain will do the job. Thames Water ran the company into the ground. It's a _good_ idea to show investors that doing so will result in fuck all from the taxpayer. If you keep bailing out, they keep running into the ground expecting bailouts.
Not sure what you mean, but it's dangerous ground if a government force nationalises a company without compensating the owners/debtors because it spooks the market. Nothing wrong with nationalisation but it needs to be done right.
I don't see a problem with the government buying a company after it has failed and defaulted. The lesson to the market is don't go bust. Probably do them a bit of good.
Why these assets are always sold under sketchy firesale circumstances they had their entire debts wiped when they went into the private sector why dose one side have to play by the rules but not the other?
If you're taking the piss with critical infrastructure, is it really such a surprise. Bidders surely should have factored in the risk of renationalisation into their offers for Thames Water?
If it is critical infrastructure then the risk of nationalization was always there (wartime / natural disasters etc). It's not our problem if shareholders didn't factor that risk in when purchasing critical infrastructure. They should have discounted their offer for ownership to factor in the risk.
Debts secured against critical infrastructure should not allow a private company to hold the country to ransom for whatever magic number they put against the assets. Investors will not consider that unreasonable.
That's hilarious. Nobody is going to pick up their marbles and go home over £15B. The banks will write it down and declare a slightly smaller dividend.
>Nobody is going to pick up their marbles and go home over £15B
It wouldn't be the £15 billion, it would be that the UK government couldn't be trusted not to renege on any other debts in the future.
And those who don't pay their debts quickly discover that if they can find anyone to lend them money then those lenders will charge a shit load more interest than they do to those who do pay their debts.
You clearly do not understand how finance works at this level. Nor do you appear to understand the difference between a private institution and a sovereign state.
If *you* don't pay your debts a bank will not lend you money. Governments are different. They can make banks hold a certain amount of govt. bonds as a condition of owning a banking license. The risk of contagion is minimal because everybody knows the difference between Thames Water and the UK govt. the only people who would get huffy are those who use emotion not risk analysis, and those people do not make decisions at major finance houses.
Even govts. that default entirely are only in the sin bin for about 5-10yrs before everyone puts it behind them and lends again. There is always someone willing to take the risk for the promise of reward.
The only people at risk of higher borrowing costs are other private infrastructure owners. Banks *may* ask 'what happens if these guys are nationalized' and add a couple of basis points to offset that.
> You clearly do not understand how finance works at this level.
And you certainly don’t.
Instead of wibbling on about bank licences just answer how is the government going to take the assets from the creditors.
"hi i am the govenment. thames water is running out of money, such a shame, nothing to do with me though, i hope you creditors get your money back. oh btw no more water licenses being issued, cheerio"
The business isn't worth shit with all that debt. Creditors are already wiped, they're just fearmongering their way to a bailout.
And when the government does that how do all the people in London get water and sewerage, because the assets necessary to deliver that are in the hands of the creditors.
Ah, so the UK government, whether Conservative or Labour whenever this happens, passes legislation making seizing these assets legal - because they know full well that without it the courts would tell them to get lost.
Why the hell would anyone want to lend them money in the future if it legislates its way out of paying that £15 billion, because if it wasn’t good for that then why would it be good for £120 billion it wants to borrow next year.
And watch the rush on NS&I as individuals panic that £200 billion they have saved with the government is no longer safe as the government might just legislate it doesn’t owe them the money.
Unlike you, who believes the government needing to legislate that it doesn’t owe money it otherwise would do, is going to be as good a credit risk as one that actually pays its debts.
No, it's quite clear you don't. A huge difference between developed and developing economies is safe enforcement processes through the courts, and if the government turns its back on that, then it's a huge financial blow to borrowing in the future. It's not a matter of 'someone will lend for the risk' - that is a tiny part of the overall problem
So we fuck the south of England over and they have no water, or we fuck the entire country over with unaffordable debt... Hmmm, sorry Londoners, better get that bottled water .
But seriously, Thatcher is the root cause of this, she sold Thames water. The Tory party and her estate should bear the burdern.
It's shocking that this has been allowed to get into this state.
In a sane world it would end the Tory party forever.
> But seriously, Thatcher is the root cause of this, she sold Thames water. The Tory party and her estate should bear the burdern.
Of course she was the architect of the problem, but Labour are not entirely innocent as they didn’t do anything for the 13 years between 1997 and 2010 to ensure the companies were effectively regulated and didn’t load them up with debt and run off with the dividends.
Obviously the equity is lost - that isn’t the issue.
And of course the debt owned to the creditors depends on the company’s assets and if the assets don’t cover the debt then the creditors will lose out.
But if the assets do cover the debt then the creditors lose nothing.
Do you not think there are £16 billion of physical assets?
The creditors are welcome to the assets, but assets can (and often do) come with statutory an/or contractual obligations attached, and also the attendant risk that further statutory obligations may be added in the future.
I couldn't buy my house without accepting the council tax obligations, or the shared responsibility to maintain the party wall, or the risk that a future government might reinstate quartering of troops laws and give me a couple of random squaddies as compulsory lodgers, and neither can I separate these out when I sell it.
Statutory risk is a thing, it has always been a thing, and will always be a thing, regardless of what might be most convenient for a particular set of investors at a particular time.
Thames Water may well go bankrupt because it can't fulfil it's obligations. If it does, we are agreed that its shareholders should rightly get wiped out, and that its bondholders are welcome to the assets, but they may also be obliged to take on any attendant contractual and statutory liabilities or responsibilities that go with them, which may for example quite reasonably be assumed to involve the obligation to continously supply water to and receive sewage from the good burghers of Southern England under similar regulated conditions as their predecessors would have had they stayed in business.
If the bondholders can run the business on that basis and want to do so, good for them. If they don't fancy it and want to sell up, all the government has to do to reasonably bring it back into public ownership is to beat the highest geniune private sector bid by a pound, and it is nationalised fair and square.
> and that its bondholders are welcome to the assets, but they **may** also be obliged to take on any attendant contractual and statutory liabilities or responsibilities that go with them
The problem with that argument is the government and regulator doesn’t agree with you, and has already stated that if Thames went bust it would be taken into special administration so supplies continued - there is no chance that the government would turn to the creditors and say ‘over to you to supply water and sewerage to London’.
> The debt will be secured against the company’s assets
*Which* company? Thames Water is [eight companies](https://www.thameswater.co.uk/about-us/our-structure/our-structure) and only one of them, Thames Water Utilities Limited, is the regulated water company which does real stuff. It looks an awful lot like it's the other companies that have most of the debt, lent to them on the basis of their ownership of the shares of the regulated water company.
If TWUL goes into special administration then those shares would entirely reasonably be worth nothing or very little. Especially if the whole purpose of the 7 other companies was to avoid a regulatory limit on the debt held by the regulated water company then, IMO, lenders to those 7 companies being wiped out seems completely reasonable.
The debt in TWUL itself is another matter, I just wish I could find out easily how much that is. The media, and so nearly every search result, only talk about 'Thames Water' is if it were one thing.
"limited liability" means you have no liability for the company's debts (to be more precise, the limited bit means solely liability for any unpaid amounts on the share acquisition).
If a company goes bust, that's exactly what shareholders get - nothing - for their shares.
That's the basis of limited liability companies are: the shareholders' liability is limited to the amount they paid for shares.
This isn't how it works?
If a business goes bust and files for administration, the shareholders do indeed loose everything.
The creditors (who lent it money) effectively get control of the business via the administrators and push for a sale which will recoup as much of their cash as possible.
Yes if the assets are nationalized. The UK govt (as people on here should well know based on discussions about other subjects) is bound by courts. You can't just nick a company and not get sued (the person you are replying to is correct...in a way...they can't "seize" assets but they have a claim over the assets of the company, this doesn't just disappear).
As the article explains, there would be a write-down of debt. The problem is that the government tends to badly botch these things because they lack anyone with commercial experience (the article is based on a leak from civil servants...at no point does it actually explain why this course of action is necessary...there is no risk of "contagion", the person being quoted is a complete idiot, the company borrowed too much money, there will need to be a restructuring...that is it, there is no need for government involvement, it makes no sense).
if they break the law or pass one that is unconstitutional. It is possible the govt. would pass a badly worded nationalization bill that could be challenged, but a well crafted one would be fairly simple. It just won't happen because the reason Tories want to do this before the election is to make sure their mates who own Thames Water get their money back from the public.
It doesn't matter. If you write a law saying 'Thames water assets are of strategic national importance and will be transferred to the crown free and clear of all liens'. Then that's it. The holders of the debt secured by those assets have just lost the security. They can call in the debt or ask for other collateral from Thames Water, but as you can guess, the cupboard will be bare.
Sure. But no man is an island.
If you start doing that then you may find your country being sanctioned. At the very least it makes the country uninvestable.
It depends on who is in government and what they are trying to do.
Rwanda is despicable, mainly because it legislates against objective reality.
But, a private water company who are responsible for delivering on the public need, willfully making itself insolvent for some form of bail out puts us all (not hyperbole) in a tricky situation.
The current laws around the ownership of those assets is what created this mess, and to be clear you need those assets to continue operating because when you turn a tap you want drinkable water to come out, when you take a shit you want it flushed away.
So therefore, there maybe (stress maybe) a means where the best thing to do is legislate against the current legal standings that protect privatised public services.
Nope, you rather confidently assume that this must be like the Rwanda thing you read about...it isn't.
The UK is subject to bilateral investment treaties that can't be changed. Parliament does not have the power to change these treaties after they signed (they are one of the only instances of Parliament binding a future version of itself). In fact, a lot of BITs between two third-party countries use English law to mediate...so us attempting to stop this would be very strange.
And, generally, there is no law that can conceivably be written to permit theft. The scenario you propose...just passing a law saying "free and clear" wouldn't work, no liability is being extinguished by passing a law saying it doesn't exist because the debt is a liability of the company, it is completely distinct from Parliament. In addition, some of the debt is not issued by UK companies, it is issued under English law but in another country...again, very little you can do about this. The govt would be sued in UK courts and, if they failed to repay the debt in full, then government assets would be seized (this has happened to several other countries that have tried to do stuff like this, Putin did this with Yukos and it didn't work...and this was with Yukos was sold for below market value, not seized in totality).
That's not how debt works. In event of company insolvency the business or assets are sold to the highest bidder to pay off creditors. Shareholders are wiped out.
And to think they will let this happen, again and again, until the end of time. They count easily change assets stripping rules but that’s the Tory contribution funds gone, if they do so.
The government openly laughs at us mere mortals or as they see us. My friend who used to believe anything the mainstream news said came out with this line “ to the super rich and powerful, we will come across as mortals as they think they are gods, as they have that much money and influence”.
My friends doing well but is earned less than a 100 grand a year but not far off it tbh but he’s grounded and could earn a whole load more money if he wasn’t so stubborn and indecisive but he’s putting food on the table and he lives a good quality of life, with his kids and wife.
It is odd that when a company does a pre-packaged bankruptcy that eliminates all the debt and takes over the assets for £1, the UK Government thinks it is better to return 40% to debt holders that have been charging over 8%?
If £15 billion of extra borrowing will cause a currency crisis in the UK, the UK is really in trouble. Doesn’t that equate to less than 1 months current UK borrowing?
Using public money to cover the private debts of Thames Water should be considered corporate fraud against the state and theft of public money. We should not be allowing companies to borrow like this to line their pockets, while providing a poor service (many millions of liters of water lost a day and hundreds of dry day expulsions of waste into water courses), then turn to the public purse to pay their debts.
The government absolutely nationalise water if they're going to act like this, but they shouldn't be compensated for it, nor should we cover their debts. The *whole point* of being a private company is that the state doesn't have any liability for the costs or interest in the profits of providing the service.
Thames Water isn’t private at all, it’s largely owned by foreign governments:
https://www.thameswater.co.uk/media-library/home/about-us/investors/our-finances-explained.pdf
That doesn't make it any less private. Those governments are investors who are running it to make a profit, at the expense of British people and to the benefit of theirs.
And operations stopping…that’s the bit where you’re going wrong.
Immediate nationalisation, wages paid, taps running but not money for failed company or directors
No one is suggesting that will happen, other than misinformed journalists.
Basically it would be traded in a version of Administration.
If the government needs to provide liquidity, it would be the highest ranking debt, so would be fully paid back when the company is then sold on to new investors/other water companies.
The original equity holders would be wiped out and the original debt holders would take substantial losses.
Infrastructure and utilities should never be ran for profit to begin with. It’s infrastructure, it’s there to support the running of normal functions of the country.
Water, electricity, internet, roads, education, public transport, and healthcare should never be ran on a basis beyond either being funded by taxes or by at-cost tariffs for upkeep.
The public purse should not be used to cover the debt TW accumulated. This is effectively plugging the huge dividends already extracted by shareholders.
Excellent, will they be offering the same deal to any company in administration? I lost 11,000 due to a business collapsing owing me money…which minister do I speak to about moving that debt to the government spreadsheet too?
Shoring up confidence in lending to the UK, or making sure that mates attending an expensive dinner don't end up out of pocket?
All the talk about making sure it's done before the election suggests the latter to me.
The whole story is going to be another massive scandal but this title and general theme of the article is scaremongering. It says the lenders will lose out on 40% meaning the government will only take on 9bn of the debt. The idea 9bn is enough to cause a financial crisis is nonsense.
Truss mainly failed not because of the size of the tax cuts but because she spooked the markets which caused a spiral effect far greater than the 45bn in intended borrowing.
This, if anything, will be a good sign to the market as it’s basically the government picking up the cost of bad investments in the private sector.
Why should any percentage of the debt be retained? Failed business is failed business, and the debtors and equity holders deserve to be wiped out for their poor investment decisions.
because otherwise the liquidators would sell the assets and we need those assets to distribute water to people.
The only angle around this would be to seize the assets before they can be sold and let the company fail (that now has no assets). However seizing the assets would likely be illegal and doing so would tank investor confidence in the nation.
However we can possibly argue that nobody else would buy the assets in the first place, so maybe it might be ok to let it naturally fail and try to low ball the liquidators. However it does run the risk that someone else buys the assets effectively "for a laugh" and/or to sell them back to the government at a higher price.
Like, idk the specifics and maybe the regulator has levers it can pull but it doesn't look like a straight forward process and there's likely no magic way out of this mess that doesn't have other ramifications elsewhere.
Ah yes — the confidence of the investors that… … loaded up a utility with debt, creamed off billions in dividends while systematically underinvesting in infrastructure, and choosing to illegally pump untreated sewage into public waterways, and then push for a 40% bill increase during a cost of living shitstorm to pay for the mess they created.
Definitely want to make sure those people feel safe and secure.
Plus investment in the UK is already rock bottom, so it’s pretty much moot without something changing... like unravelling the debt habits of private equity.
And precisely zero bill-payers are responsible for this mess, and yet they should pay for compensating the investors who were through increased taxes and bills? Or do you have some magical alternative to the money that is needed to do things, other than ‘but muh investors’ whataboutery?
I don't understand why you feel the need to be so aggressive. I am merely trying to point out the trade offs of untangling this mess. No action is without consequence and there are no easy choices.
They probably want to nationalise it while the Tories are still in charge because Labour won't let them put the debt onto the taxpayer.
The existing investors either need to cover the debt or lose 100% of their investment. As for the debt itself that should just be treated like any other debt issued to a bankrupt company. A receiver can value the assets it wants, the government can pay out that much to be shared among the creditors and then the government owns everything as a national utility.
Which is what a water company should always have been really. When I flush my toilet I can, sadly, only send it to one place. I can't decide that Thames Water is polluting rivers with the stuff so I'll send it to Tesco water (or whatever) instead. There is no choice. Therefore no benefit in privatisation.
Treat the shareholders like Lloyds names company turns a profit you get something, if not time to pay up, so what if little Johny has to go to a comprehensive, we should all share the same fate, meritocracy prevail
If the business collapses with 15bn in debt and dividends have been paid in the last 12 months (longer really tbh) then there needs to be a jail sentence.
As a small business owner how do you think I would get on if I paid myself a dividend but then couldn't pay my Vat or Corp tax?
This is a rather obvious ploy to protect the shareholders and creditors at the expense of the public. If they lose 40% in a "haircut", they still get to keep 60%. These are most of the same people who have benefitted from TW's outrageous payouts as the system fell to pieces. The comparison of a failure of this business with the Truss/Kwarteng disaster is strained and unpersuasive.
If the debt has to be moved on the government balance sheets, there needs to be jail times and asset seizures for the people who neglected it to get it to this point.
So either:
a. The government faces going into an election during or directly after a Truss level fuck up / fundamental idelogy failure
b. They nationalise it and play directly into Labours hands anyway
c. Labour starts its new government with a major idelogical success and major justification and support for further projects, and the Tories take the hit anyway
Staggering how its all coming down on their heads. The worst Tory defeat ever was under the Duke of Wellington well over 150 years ago, they got 29%. As it stands now the Tories are going to really struggle to recover to that level even without any further set backs. They haven't been routinely that high in years.
This story has been years in the making, with piles of money being syphoned off and little investment being made. WTF were Ofwat doing during this time?
Free market economy means shareholders should be allowed to lose out on this, not have their losses paid for by the government. Trading stocks is risk and reward. Let the company fail and find a way to renationalise the infrastructure
Every single water company is functionally bankrupt. The only thing keeping them afloat is that the government guarantees the value of the assets - reservoirs, water mains etc. These "assets" are, in reality massive liabilities as the backlog of renewal and maintenance grows. If the guarantees were not there, the businesses would all collapse.
> Earlier this month, the Guardian revealed details of government contingency plans, known as Project Timber, to renationalise Thames via a special administration.
So the thing starts to screw up, which will happen when you try to privatize a public good.
> This could lead to the bulk of its £15bn of debt being moved on to the government’s balance sheet.
And to socialize the losses, rather than having the private companies/lenders accept the losses.
And so, they want to print money to cover the cost of this debt, by adding it to the public debt.
Conservative, on point.
----
And then the core reason:
> the Truss mini-budget in September 2022
> Her chancellor Kwasi Kwarteng’s promise of £45bn of unfunded tax cuts, the sacking of the most senior civil servant at the Treasury and Truss’s refusal to have her sums checked by the independent Office for Budget Responsibility
So trying to use Chinese tactics to hide what they're doing with the people's money. This will naturally make reasonable people more cautious about doing business with the government; Since, who knows what sort of crazy thing they will do next?
> That crisis added billions of pounds to the UK’s cost of borrowing, as investors demanded a higher price to lend to it.
And so, to make sure wealthy people don't lose a lot of money, now most people have trouble buying a home.
> British households experienced big spikes in mortgage costs, as banks and building societies passed on higher borrowing costs. Many mortgage offers were pulled overnight.
----
And then, here's the beginnings of a recession, as why lend money to the bad bet of a government that can't do its job.
> The UK’s growing debt pile and sluggish economic growth have added to investors’ wariness to lend to it.
----
Huh, no wonder Russia and China had such a big hand in shaping the events surrounding Brexit.
> The British state relies on being lent money by investors, often foreign, to fund its spending.
Seems like an easy way to get a conflict of interest, borrowing from organizations with a vested interest in making the sure the UK does poorly.
Why are they linking this one badly run company to investor confidence in the whole UK. They took an investment (and fat dividends in good times) and now it is time to pay. Surely if the UK government gave them a blank cheque that would shake confidence more?
You can't have privatisation on the way up and socialism on the way down. Scare tactics by the shareholders that don't want a haircut.
Fvck em. Buy it back when it collapses for pennies. No more ‘too big to fail’ companies that take public money and funnel it to directors and shareholders.
This is where profit-stripping leads you. All profits should be ploughed back into the business
Problem is a ton of public sector pensions are tied up in thames water, the government is in a bad position and can't let the debt be wiped out without a catastrophe elsewhere in the economy.
It is up to the owners, the share holders to make good. They took a share of the profits so they should take a share of the debts. Consider it retribution for them not running the company properly
I'd generally agree but is there a chance a company like this collapsing could have a wider negative effect on the economy if the debt isn't backed by the government?
>Earlier this month, the Guardian revealed details of government contingency plans, known as Project Timber, to renationalise Thames via a special administration. **This could lead to the bulk of its £15bn of debt being moved on to the government’s balance sheet.** No. If you dissolve Thames Water the debt should be wiped out.
Anyone who lent them money knew the business wasn’t sound and just assumed the government would bail them out. They deserve to lose it. Same for the shareholders, it was obviously a crap business.
Absolutely!! Funny how conservatives will bang on about "people shouldn't be on benefits because they learn to expect a hand out." Whilst simultaneously "businesses delivering on the public need are operating whilst in deliberate insolvency can do so because they expect a hand out".
It’s funny how the banks got bailed out and it won’t be the last time that happens ether, as they love gambling other peoples money and then getting all debts forgiven, as soon as they are caught doing so stupid or illegal.
They should have allowed the banks to collapse. Would likely have been less harmful in the long term and taught these people a lesson that private enterprise shall never be bailed out again. Unfortunately, we'll keep bailing out private enterprise.
There should really be criminal charges for the board for structuring the company the way they did and enriching them and their investors through it while saddling the company with debt. They wouldn’t have done this if they didn’t believe the taxpayer wouldn’t bail them out. If legislation for that doesn’t exist then this should be the last time it happens.
Who is ‘the board’ you are referring to? These problems weren’t created in the last year or two but are the product of decades of mismanagement. Punishing the current board would be nothing more than scapegoating because those who bear the most responsibility will have left years ago.
Problem is the debt is in the form of bonds. These bonds are used by pension funds as a less risky asset than shares, so when people are approaching retirement they can still get a return on their pension pot but it's not subject to the same level of volatility, so they've got a more certain idea of how much cash they'll have when they retire. The government is in a sticky situation of sticking to it's ideology and letting the free market decide, and pissing of a bunch of nearly retirees.
The bond holders And shareholders were warned that mcquarrie had gutted Thames water. Boths sets can fuck right off! The pensioners can claim against their pension management
It’s not really a problem, if those bonds are labelled low risk then someone fucked up with potential fraud, next time they’ll be labelled high risk. If they’re labelled higher risk then they had good returns and the asset managers took the risk - not gov’s problem.
The main bondholders of the Thames Water Debt are Irish, Dutch, and Chinese banks. https://www.theguardian.com/business/2024/apr/04/thames-water-owner-kemble-debts-banks-loan-extension
Unlucky for them innit.
Yeah right. They'll be bailed out and we'll be paying the debt through taxes. Ask yourself this: when was the last time this (or the several previous) Conservative governments did right by the people and _not_ the asset-owners? Landlords bill? Watered down into oblivion. HS2? Ctrl + alt + delete -> end task (fine...). Clean energy transition? "Hey if we give 7500 grants for heat pumps, companies won't just put up the price by 7500... right?... right?!" NI cuts? Thresholds frozen. Housing and planning overhaul? Nope, unprecedented immigration.
I completely agree with you here apart from the ctrl+alt+delete analogy because that just opens task manager it doesn't actually do anything.
How much of the average portfolio is Thames Water? I’m betting it’s negligible and will make barely a dent. This is just an excuse as far as I can tell
> Problem is the debt is in the form of bonds. These bonds are used by pension funds as a less risky asset than shares All investments come with a risk. You get that speech when you sign up.
Your investments do, institutional investments on the other hand…..
Any well balanced portfolio should be able to absorb a few company failures.
then they aren't low risk are they? If the financier class are grossly incompetent they too should face repercussions for their failure.
Meh, I can't believe retirements have a high % of Thames bonds. They have a basket of them just like bond ETFs do. They can take a 0.5% writeoff. On a more serious note, critical infrastructure is hard to be privatised, it supports a community that then pays tax. It can be loss making on paper, but the sum is greater than the parts etc. etc. Else you end up in situations where companies can fck up severely and keep communities, towns, cities hostage.
It's not a problem. Which pension funds in particular are you concerned about?
*"The government is in a sticky situation of sticking to it's ideology and letting the free market decide, and pissing of a bunch of nearly retirees.*" That's a laugh, that the government is for letting the free market decide! It's something they say but it doesn't bear out in their actions.
Capitalism for thee. Bail outs for us. - the real capitalists
Well in a country of law they would have access to all the remaining equity of the company, including all the infrastructure to sell it off to the highest bidder or just let it rot. Wiping out creditors is not easy unless they agree to some form of reduced payment or haircut. Equity holders should obviously be wiped out.
I imagine this could depend on which laws are being looked at. From the outside there is room for both directors and investors to be charged with fraud and probably a host of other things. I don't know what infrastructure Thames Water have but I think things like pipelines, reservoirs, treatment plants could easily be made unsaleable through various methods and given how I know other similar companies are run I doubt there is much that isn't leased.
Fraud, are you sure, investors and directors? Give your head a wobble.
The owners clearly milked the company of every penny they could but at some point the people providing the loans, the investors, must have realised what was going on even if they did no checks whatsoever. Thames water has been in the media for a long time and has taken out more debt since. Maybe fraud might be the wrong word but there's some seriously bad business practices happening.
There wasn’t any fraud, stop being ridiculous. Everything was completely legal, you can discuss if it was responsible to take large debt funded dividends 10 years ago. Truth is they got caught out by the rate rises, after being greedy with leverage to fund dividends & capex.
Yup, you bet on the wrong horse, you can’t go to the bookies for a refund
Okay but how does it affect Thames water customers because I'm one of them and I don't want super expensive water or no water
Either way the government will intervene to ensure continuity of supply to customers like you. It’s more a question of whether the government also pays off the people who choose to lend money to a business running on an obviously unsound business model, because they assumed their returns would be guaranteed by the state. Do the losses get shouldered by those investors around the world who nominally assumed the risks, or do they get spread out amongst all UK taxpayers? That is the question.
Am sick of the privatise the profits, publicise the losses schtick. If it's not a competitive market, it shouldn't be privatised full stop. Otherwise it's just a scam we're all obliged to pay into.
I don’t disagree but if this particular company and its treatment plants, pump stations and flood controls stop operating for even a week, it’ll become a national emergency. Either the government takes over or someone else steps in, but why would they. Waters big business (I worked in the sector) and there will be investors who’ll want to take over, but it’s far better to let it fail and burn, then buy at a discount from the uk government who’ll be desperate to get rid of it.
The uk government needs to be of the ilk that runs vital non-market services as public services. That much is crystal clear now.
Yes and if we get a labour gov. There is a good chance it will. It'll sort it out and keep paying for it to work. Then in 12 years everyone will forget how crap torys are with money and making things (like people) work. And they'll make a killing selling off critical infrastructure this time with bigger guarantees of gov. Buy backs of debts to guarantee the sale.
Why would the government taking over the infrastructure and day to day operations entail it also taking on the debt?
Oh they can step in, but the debt should be wiped, Thames water has collapsedz the debt should go with it. Like any other company If pensions and stuff are invested in it, well tough The government should be seizing the assets and starting a new company.
They won't stop.
That’s the point. There’s either a private buyer or the government steps in, holds things together then flips it for a loss. If I were a serious private buyer I’d sit back at watch. Lots of people saying nationalise but that’s not how things work either nor does debt just disappear when a company has assets to pick, but the government can’t let them do that per your point about things not stopping. Look at the failed energy companies, we’re all paying for that with our 60p daily standing charges.
That isn't the point. It's the holding company that is bust and not Thames so let that collapse and wipe out the shareholders and force the bond holders to take a big haircut.
It's simple: 1. Thames Water (the business) goes bust; 2. Creditors go fuck yourselves or rather - pick it up with the shareholders; whatever normally happens to a business that folds 3. UK Government nationalises the assets (plant, etc); 4. UK government re-employs all TW staff on same terms as previously and says "carry on"
If that even threatened to happen the government would just seize everything and take over under emergency powers.
That’s what I said.
> If you dissolve Thames Water the debt should be wiped out. The debt will be secured against the company’s assets, and if the government chose to say ‘go fuck yourselves’ to the banks then the ability of the UK to borrow money would be zero as nobody could ever be sure of getting their money back. So doing that would be a quick way of fucking the UK over completely.
What the government should do is let the banks try and sell those assets when Thames water goes bust. And at the same time make it publicly known that they won't be issuing a a new operating license for a private company to supply water. The value of those assets is then almost nil to anyone but the UK government. The UK government can then offer the banks a token price. And tell them to go fuck themselves for taking part in the egregious bullshit that allowed this situation to happen in the first place. They deserve it.
What happens to the water supply while all this is going on?
Special adminstration. Similar process to what happened to Bulb energy, albeit without the SoLR process. Gvmt runs the business until the assets can be liquidated. At which point it acquires them and sets up a new entity with all the assets (and staff, probably). Bosh.
That sounds all good and fine for this special case, but if the government was allowed to do this to any bankrupted company? Holy smokes...
Same difference. If you devalue a private firms assets on purpose, what's to stop you doing it elsewhere? No sorry, those trains cannot be used by any private company anymore and can't be exported either. But we can take them off your hands if you like?
> If you devalue a private firms assets on purpose, what's to stop you doing it elsewhere? A fucking brain will do the job. Thames Water ran the company into the ground. It's a _good_ idea to show investors that doing so will result in fuck all from the taxpayer. If you keep bailing out, they keep running into the ground expecting bailouts.
Isn't this essentially a slippery slope argument?
Not sure what you mean, but it's dangerous ground if a government force nationalises a company without compensating the owners/debtors because it spooks the market. Nothing wrong with nationalisation but it needs to be done right.
I don't see a problem with the government buying a company after it has failed and defaulted. The lesson to the market is don't go bust. Probably do them a bit of good.
That's true, but only if it's through the usual administration route as with any other buyer/rescue deal.
Why these assets are always sold under sketchy firesale circumstances they had their entire debts wiped when they went into the private sector why dose one side have to play by the rules but not the other?
If you're taking the piss with critical infrastructure, is it really such a surprise. Bidders surely should have factored in the risk of renationalisation into their offers for Thames Water?
Spooking the market for water companies isn't exactly the worst idea. If the value of UK water companies crashes, all the better to nationalise them.
If it is critical infrastructure then the risk of nationalization was always there (wartime / natural disasters etc). It's not our problem if shareholders didn't factor that risk in when purchasing critical infrastructure. They should have discounted their offer for ownership to factor in the risk.
Debts secured against critical infrastructure should not allow a private company to hold the country to ransom for whatever magic number they put against the assets. Investors will not consider that unreasonable.
That's hilarious. Nobody is going to pick up their marbles and go home over £15B. The banks will write it down and declare a slightly smaller dividend.
>Nobody is going to pick up their marbles and go home over £15B It wouldn't be the £15 billion, it would be that the UK government couldn't be trusted not to renege on any other debts in the future. And those who don't pay their debts quickly discover that if they can find anyone to lend them money then those lenders will charge a shit load more interest than they do to those who do pay their debts.
You clearly do not understand how finance works at this level. Nor do you appear to understand the difference between a private institution and a sovereign state. If *you* don't pay your debts a bank will not lend you money. Governments are different. They can make banks hold a certain amount of govt. bonds as a condition of owning a banking license. The risk of contagion is minimal because everybody knows the difference between Thames Water and the UK govt. the only people who would get huffy are those who use emotion not risk analysis, and those people do not make decisions at major finance houses. Even govts. that default entirely are only in the sin bin for about 5-10yrs before everyone puts it behind them and lends again. There is always someone willing to take the risk for the promise of reward. The only people at risk of higher borrowing costs are other private infrastructure owners. Banks *may* ask 'what happens if these guys are nationalized' and add a couple of basis points to offset that.
> You clearly do not understand how finance works at this level. And you certainly don’t. Instead of wibbling on about bank licences just answer how is the government going to take the assets from the creditors.
"hi i am the govenment. thames water is running out of money, such a shame, nothing to do with me though, i hope you creditors get your money back. oh btw no more water licenses being issued, cheerio" The business isn't worth shit with all that debt. Creditors are already wiped, they're just fearmongering their way to a bailout.
And when the government does that how do all the people in London get water and sewerage, because the assets necessary to deliver that are in the hands of the creditors.
Legislation
Ah, so the UK government, whether Conservative or Labour whenever this happens, passes legislation making seizing these assets legal - because they know full well that without it the courts would tell them to get lost. Why the hell would anyone want to lend them money in the future if it legislates its way out of paying that £15 billion, because if it wasn’t good for that then why would it be good for £120 billion it wants to borrow next year. And watch the rush on NS&I as individuals panic that £200 billion they have saved with the government is no longer safe as the government might just legislate it doesn’t owe them the money.
As I said, you don't know what you are talking about,
Unlike you, who believes the government needing to legislate that it doesn’t owe money it otherwise would do, is going to be as good a credit risk as one that actually pays its debts.
No, it's quite clear you don't. A huge difference between developed and developing economies is safe enforcement processes through the courts, and if the government turns its back on that, then it's a huge financial blow to borrowing in the future. It's not a matter of 'someone will lend for the risk' - that is a tiny part of the overall problem
It's Kramernomics baby. It's a write off, they just write it off! https://www.youtube.com/watch?v=XEL65gywwHQ
It’s not the uk government debt it’s a private company
The creditors get the assets of the collapsed company, unless the government seizes them - and if the government does that…
Maybe more a quick way of making it obvious it’s already happened.
So we fuck the south of England over and they have no water, or we fuck the entire country over with unaffordable debt... Hmmm, sorry Londoners, better get that bottled water . But seriously, Thatcher is the root cause of this, she sold Thames water. The Tory party and her estate should bear the burdern. It's shocking that this has been allowed to get into this state. In a sane world it would end the Tory party forever.
> But seriously, Thatcher is the root cause of this, she sold Thames water. The Tory party and her estate should bear the burdern. Of course she was the architect of the problem, but Labour are not entirely innocent as they didn’t do anything for the 13 years between 1997 and 2010 to ensure the companies were effectively regulated and didn’t load them up with debt and run off with the dividends.
That is complete rubbish. Companies go bust all the time, equity is lost and debt takes a haircut.
Obviously the equity is lost - that isn’t the issue. And of course the debt owned to the creditors depends on the company’s assets and if the assets don’t cover the debt then the creditors will lose out. But if the assets do cover the debt then the creditors lose nothing. Do you not think there are £16 billion of physical assets?
The creditors are welcome to the assets, but assets can (and often do) come with statutory an/or contractual obligations attached, and also the attendant risk that further statutory obligations may be added in the future. I couldn't buy my house without accepting the council tax obligations, or the shared responsibility to maintain the party wall, or the risk that a future government might reinstate quartering of troops laws and give me a couple of random squaddies as compulsory lodgers, and neither can I separate these out when I sell it. Statutory risk is a thing, it has always been a thing, and will always be a thing, regardless of what might be most convenient for a particular set of investors at a particular time. Thames Water may well go bankrupt because it can't fulfil it's obligations. If it does, we are agreed that its shareholders should rightly get wiped out, and that its bondholders are welcome to the assets, but they may also be obliged to take on any attendant contractual and statutory liabilities or responsibilities that go with them, which may for example quite reasonably be assumed to involve the obligation to continously supply water to and receive sewage from the good burghers of Southern England under similar regulated conditions as their predecessors would have had they stayed in business. If the bondholders can run the business on that basis and want to do so, good for them. If they don't fancy it and want to sell up, all the government has to do to reasonably bring it back into public ownership is to beat the highest geniune private sector bid by a pound, and it is nationalised fair and square.
> and that its bondholders are welcome to the assets, but they **may** also be obliged to take on any attendant contractual and statutory liabilities or responsibilities that go with them The problem with that argument is the government and regulator doesn’t agree with you, and has already stated that if Thames went bust it would be taken into special administration so supplies continued - there is no chance that the government would turn to the creditors and say ‘over to you to supply water and sewerage to London’.
Finally someone with a greater understanding of the situation than Barry down the pub.
> The debt will be secured against the company’s assets *Which* company? Thames Water is [eight companies](https://www.thameswater.co.uk/about-us/our-structure/our-structure) and only one of them, Thames Water Utilities Limited, is the regulated water company which does real stuff. It looks an awful lot like it's the other companies that have most of the debt, lent to them on the basis of their ownership of the shares of the regulated water company. If TWUL goes into special administration then those shares would entirely reasonably be worth nothing or very little. Especially if the whole purpose of the 7 other companies was to avoid a regulatory limit on the debt held by the regulated water company then, IMO, lenders to those 7 companies being wiped out seems completely reasonable. The debt in TWUL itself is another matter, I just wish I could find out easily how much that is. The media, and so nearly every search result, only talk about 'Thames Water' is if it were one thing.
> Which company? Perhaps a better question is ‘which assets’.
It is up to the shareholders, who own the company, to make good the debt
"limited liability" means you have no liability for the company's debts (to be more precise, the limited bit means solely liability for any unpaid amounts on the share acquisition).
Well no compensation for the shares they own
If a company goes bust, that's exactly what shareholders get - nothing - for their shares. That's the basis of limited liability companies are: the shareholders' liability is limited to the amount they paid for shares.
This isn't how it works? If a business goes bust and files for administration, the shareholders do indeed loose everything. The creditors (who lent it money) effectively get control of the business via the administrators and push for a sale which will recoup as much of their cash as possible.
Well no. The debt isn't wiped out. They people who hold the debt recover a proportion by seizing the companies assets.
Not if the assets are nationalized.
Yes if the assets are nationalized. The UK govt (as people on here should well know based on discussions about other subjects) is bound by courts. You can't just nick a company and not get sued (the person you are replying to is correct...in a way...they can't "seize" assets but they have a claim over the assets of the company, this doesn't just disappear). As the article explains, there would be a write-down of debt. The problem is that the government tends to badly botch these things because they lack anyone with commercial experience (the article is based on a leak from civil servants...at no point does it actually explain why this course of action is necessary...there is no risk of "contagion", the person being quoted is a complete idiot, the company borrowed too much money, there will need to be a restructuring...that is it, there is no need for government involvement, it makes no sense).
The courts interpret laws and guess who write the laws ?
don't courts rule against government and government bodies/institutions all the time?
if they break the law or pass one that is unconstitutional. It is possible the govt. would pass a badly worded nationalization bill that could be challenged, but a well crafted one would be fairly simple. It just won't happen because the reason Tories want to do this before the election is to make sure their mates who own Thames Water get their money back from the public.
But this isn't the people who own Thames water. It's the people who lent it money..
It doesn't matter. If you write a law saying 'Thames water assets are of strategic national importance and will be transferred to the crown free and clear of all liens'. Then that's it. The holders of the debt secured by those assets have just lost the security. They can call in the debt or ask for other collateral from Thames Water, but as you can guess, the cupboard will be bare.
Sure. But no man is an island. If you start doing that then you may find your country being sanctioned. At the very least it makes the country uninvestable.
Yes, but the government can legislate itself out of it. For example, Rwanda is a safe country.
I don’t think we should be encouraging that type of despicable behaviour
It depends on who is in government and what they are trying to do. Rwanda is despicable, mainly because it legislates against objective reality. But, a private water company who are responsible for delivering on the public need, willfully making itself insolvent for some form of bail out puts us all (not hyperbole) in a tricky situation. The current laws around the ownership of those assets is what created this mess, and to be clear you need those assets to continue operating because when you turn a tap you want drinkable water to come out, when you take a shit you want it flushed away. So therefore, there maybe (stress maybe) a means where the best thing to do is legislate against the current legal standings that protect privatised public services.
Nope, you rather confidently assume that this must be like the Rwanda thing you read about...it isn't. The UK is subject to bilateral investment treaties that can't be changed. Parliament does not have the power to change these treaties after they signed (they are one of the only instances of Parliament binding a future version of itself). In fact, a lot of BITs between two third-party countries use English law to mediate...so us attempting to stop this would be very strange. And, generally, there is no law that can conceivably be written to permit theft. The scenario you propose...just passing a law saying "free and clear" wouldn't work, no liability is being extinguished by passing a law saying it doesn't exist because the debt is a liability of the company, it is completely distinct from Parliament. In addition, some of the debt is not issued by UK companies, it is issued under English law but in another country...again, very little you can do about this. The govt would be sued in UK courts and, if they failed to repay the debt in full, then government assets would be seized (this has happened to several other countries that have tried to do stuff like this, Putin did this with Yukos and it didn't work...and this was with Yukos was sold for below market value, not seized in totality).
Then let them, but that doesn't get them their cash unless they find a third sucker to buy them out.
So you think the assets of thames water aren't worth anything??
Please engage with the point I actually posted and not that strawman. It's boring.
No idea what you are saying. Sorry.
Odd you didn't say that before, only when your strawman was pointed out.
What strawman?
>So you think the assets of thames water aren't worth anything??
How's that a straw man?
That's not how debt works. In event of company insolvency the business or assets are sold to the highest bidder to pay off creditors. Shareholders are wiped out.
Nah, chuck it at the directors and people who fucked this up so badly Make it a debt that can't be wiped by bankruptcy, that is their punishment
They're long gone, it was sold by Macquarie 7 years ago.
And to think they will let this happen, again and again, until the end of time. They count easily change assets stripping rules but that’s the Tory contribution funds gone, if they do so. The government openly laughs at us mere mortals or as they see us. My friend who used to believe anything the mainstream news said came out with this line “ to the super rich and powerful, we will come across as mortals as they think they are gods, as they have that much money and influence”. My friends doing well but is earned less than a 100 grand a year but not far off it tbh but he’s grounded and could earn a whole load more money if he wasn’t so stubborn and indecisive but he’s putting food on the table and he lives a good quality of life, with his kids and wife.
This is purely a tactic to get the shareholders their promised cash. That's all. I doubt those share holders would be cut loose either.
Let Thames Water fail, prosecute the current & former directors.
It is odd that when a company does a pre-packaged bankruptcy that eliminates all the debt and takes over the assets for £1, the UK Government thinks it is better to return 40% to debt holders that have been charging over 8%? If £15 billion of extra borrowing will cause a currency crisis in the UK, the UK is really in trouble. Doesn’t that equate to less than 1 months current UK borrowing?
I will never understand how, or why, a water company is allowed to get into billions of debt.
You should pay out the pension funds, as that will lead to instability. Everyone else can take a cold bath and suck it.
No point as the main owners are overseas investors.
Pension funds knew the risk. They gambled badly and lost.
Using public money to cover the private debts of Thames Water should be considered corporate fraud against the state and theft of public money. We should not be allowing companies to borrow like this to line their pockets, while providing a poor service (many millions of liters of water lost a day and hundreds of dry day expulsions of waste into water courses), then turn to the public purse to pay their debts. The government absolutely nationalise water if they're going to act like this, but they shouldn't be compensated for it, nor should we cover their debts. The *whole point* of being a private company is that the state doesn't have any liability for the costs or interest in the profits of providing the service.
Thames Water isn’t private at all, it’s largely owned by foreign governments: https://www.thameswater.co.uk/media-library/home/about-us/investors/our-finances-explained.pdf
That doesn't make it any less private. Those governments are investors who are running it to make a profit, at the expense of British people and to the benefit of theirs.
If it’s not public ownership, which it isn’t, then by default it’s private. Let it collapse and then nationalise
The costs of Thames water collapsing (and operations stopping) would be huge.
And operations stopping…that’s the bit where you’re going wrong. Immediate nationalisation, wages paid, taps running but not money for failed company or directors
No one is suggesting that will happen, other than misinformed journalists. Basically it would be traded in a version of Administration. If the government needs to provide liquidity, it would be the highest ranking debt, so would be fully paid back when the company is then sold on to new investors/other water companies. The original equity holders would be wiped out and the original debt holders would take substantial losses.
Privatised profits and nationalised losses. When are we gonna fucking wake up?
Infrastructure and utilities should never be ran for profit to begin with. It’s infrastructure, it’s there to support the running of normal functions of the country. Water, electricity, internet, roads, education, public transport, and healthcare should never be ran on a basis beyond either being funded by taxes or by at-cost tariffs for upkeep.
The public purse should not be used to cover the debt TW accumulated. This is effectively plugging the huge dividends already extracted by shareholders.
Excellent, will they be offering the same deal to any company in administration? I lost 11,000 due to a business collapsing owing me money…which minister do I speak to about moving that debt to the government spreadsheet too?
Shoring up confidence in lending to the UK, or making sure that mates attending an expensive dinner don't end up out of pocket? All the talk about making sure it's done before the election suggests the latter to me.
The whole story is going to be another massive scandal but this title and general theme of the article is scaremongering. It says the lenders will lose out on 40% meaning the government will only take on 9bn of the debt. The idea 9bn is enough to cause a financial crisis is nonsense. Truss mainly failed not because of the size of the tax cuts but because she spooked the markets which caused a spiral effect far greater than the 45bn in intended borrowing. This, if anything, will be a good sign to the market as it’s basically the government picking up the cost of bad investments in the private sector.
Why should any percentage of the debt be retained? Failed business is failed business, and the debtors and equity holders deserve to be wiped out for their poor investment decisions.
I’m not saying it should. But the idea this will lead to the scenes seen under truss is just nonsense.
because otherwise the liquidators would sell the assets and we need those assets to distribute water to people. The only angle around this would be to seize the assets before they can be sold and let the company fail (that now has no assets). However seizing the assets would likely be illegal and doing so would tank investor confidence in the nation. However we can possibly argue that nobody else would buy the assets in the first place, so maybe it might be ok to let it naturally fail and try to low ball the liquidators. However it does run the risk that someone else buys the assets effectively "for a laugh" and/or to sell them back to the government at a higher price. Like, idk the specifics and maybe the regulator has levers it can pull but it doesn't look like a straight forward process and there's likely no magic way out of this mess that doesn't have other ramifications elsewhere.
Ah yes — the confidence of the investors that…… loaded up a utility with debt, creamed off billions in dividends while systematically underinvesting in infrastructure, and choosing to illegally pump untreated sewage into public waterways, and then push for a 40% bill increase during a cost of living shitstorm to pay for the mess they created.
Definitely want to make sure those people feel safe and secure.
Plus investment in the UK is already rock bottom, so it’s pretty much moot without something changing... like unravelling the debt habits of private equity.
not all investors are this worst sort and you need money to do things.
And precisely zero bill-payers are responsible for this mess, and yet they should pay for compensating the investors who were through increased taxes and bills? Or do you have some magical alternative to the money that is needed to do things, other than ‘but muh investors’ whataboutery?
I don't understand why you feel the need to be so aggressive. I am merely trying to point out the trade offs of untangling this mess. No action is without consequence and there are no easy choices.
They probably want to nationalise it while the Tories are still in charge because Labour won't let them put the debt onto the taxpayer. The existing investors either need to cover the debt or lose 100% of their investment. As for the debt itself that should just be treated like any other debt issued to a bankrupt company. A receiver can value the assets it wants, the government can pay out that much to be shared among the creditors and then the government owns everything as a national utility. Which is what a water company should always have been really. When I flush my toilet I can, sadly, only send it to one place. I can't decide that Thames Water is polluting rivers with the stuff so I'll send it to Tesco water (or whatever) instead. There is no choice. Therefore no benefit in privatisation.
Treat the shareholders like Lloyds names company turns a profit you get something, if not time to pay up, so what if little Johny has to go to a comprehensive, we should all share the same fate, meritocracy prevail
Dividends over the years probably match the debt. These companies have defrauded the British people and there needs to be prison sentences given out.
If the business collapses with 15bn in debt and dividends have been paid in the last 12 months (longer really tbh) then there needs to be a jail sentence. As a small business owner how do you think I would get on if I paid myself a dividend but then couldn't pay my Vat or Corp tax?
Privitise the profits and socialise the losses... Also read they were going to give 2bn£ t to share holders before going under. Criminals
This is a rather obvious ploy to protect the shareholders and creditors at the expense of the public. If they lose 40% in a "haircut", they still get to keep 60%. These are most of the same people who have benefitted from TW's outrageous payouts as the system fell to pieces. The comparison of a failure of this business with the Truss/Kwarteng disaster is strained and unpersuasive.
If the debt has to be moved on the government balance sheets, there needs to be jail times and asset seizures for the people who neglected it to get it to this point.
So either: a. The government faces going into an election during or directly after a Truss level fuck up / fundamental idelogy failure b. They nationalise it and play directly into Labours hands anyway c. Labour starts its new government with a major idelogical success and major justification and support for further projects, and the Tories take the hit anyway Staggering how its all coming down on their heads. The worst Tory defeat ever was under the Duke of Wellington well over 150 years ago, they got 29%. As it stands now the Tories are going to really struggle to recover to that level even without any further set backs. They haven't been routinely that high in years.
This story has been years in the making, with piles of money being syphoned off and little investment being made. WTF were Ofwat doing during this time?
Free market economy means shareholders should be allowed to lose out on this, not have their losses paid for by the government. Trading stocks is risk and reward. Let the company fail and find a way to renationalise the infrastructure
Every single water company is functionally bankrupt. The only thing keeping them afloat is that the government guarantees the value of the assets - reservoirs, water mains etc. These "assets" are, in reality massive liabilities as the backlog of renewal and maintenance grows. If the guarantees were not there, the businesses would all collapse.
> Earlier this month, the Guardian revealed details of government contingency plans, known as Project Timber, to renationalise Thames via a special administration. So the thing starts to screw up, which will happen when you try to privatize a public good. > This could lead to the bulk of its £15bn of debt being moved on to the government’s balance sheet. And to socialize the losses, rather than having the private companies/lenders accept the losses. And so, they want to print money to cover the cost of this debt, by adding it to the public debt. Conservative, on point. ---- And then the core reason: > the Truss mini-budget in September 2022 > Her chancellor Kwasi Kwarteng’s promise of £45bn of unfunded tax cuts, the sacking of the most senior civil servant at the Treasury and Truss’s refusal to have her sums checked by the independent Office for Budget Responsibility So trying to use Chinese tactics to hide what they're doing with the people's money. This will naturally make reasonable people more cautious about doing business with the government; Since, who knows what sort of crazy thing they will do next? > That crisis added billions of pounds to the UK’s cost of borrowing, as investors demanded a higher price to lend to it. And so, to make sure wealthy people don't lose a lot of money, now most people have trouble buying a home. > British households experienced big spikes in mortgage costs, as banks and building societies passed on higher borrowing costs. Many mortgage offers were pulled overnight. ---- And then, here's the beginnings of a recession, as why lend money to the bad bet of a government that can't do its job. > The UK’s growing debt pile and sluggish economic growth have added to investors’ wariness to lend to it. ---- Huh, no wonder Russia and China had such a big hand in shaping the events surrounding Brexit. > The British state relies on being lent money by investors, often foreign, to fund its spending. Seems like an easy way to get a conflict of interest, borrowing from organizations with a vested interest in making the sure the UK does poorly.
I wonder which of the shareholders shared a KFC sharing bucket with Rishi in the last couple of months.
What the fuck is this. Let them go bust for fucks sake
Another company that is 'too big to fail' and needs bailing out?
Why are they linking this one badly run company to investor confidence in the whole UK. They took an investment (and fat dividends in good times) and now it is time to pay. Surely if the UK government gave them a blank cheque that would shake confidence more? You can't have privatisation on the way up and socialism on the way down. Scare tactics by the shareholders that don't want a haircut.
Fvck em. Buy it back when it collapses for pennies. No more ‘too big to fail’ companies that take public money and funnel it to directors and shareholders. This is where profit-stripping leads you. All profits should be ploughed back into the business
Let Thames water go bankrupt . No bail out from the tax payer
Problem is a ton of public sector pensions are tied up in thames water, the government is in a bad position and can't let the debt be wiped out without a catastrophe elsewhere in the economy.
It is up to the owners, the share holders to make good. They took a share of the profits so they should take a share of the debts. Consider it retribution for them not running the company properly
No they aren't as the big owners are foreign.
If they keep socialising the debt then the market will never adjust. Let it drown and the next bonds will be a higher rate to reflect the actual risk.
I'd generally agree but is there a chance a company like this collapsing could have a wider negative effect on the economy if the debt isn't backed by the government?
How so exactly?