Thames Water nearing the cliff edge.

[blup]

Nationalise it - who finishes up paying the bills?

The taxpayers, either through re nationalisation or increased bills or both

If a company goes bankrupt what do the receivers do to pay off as much debt as they can? They can consider selling the lot but do they consider which option repays the most debt?

As a public service, albeit privately owned, the regulators would have powers to prevent selling off tne assets, so all roads point to restructuring the debt (yeah right) or nationalisation.

If nationalised have we bought it?

We've bought a house complete with the sellers mortgage, which is worth x times the asset.

Was this possible problem considered when the company was originally set up? It could have been but pass.

We were promised investment when the water companies were privatised, and we got private equity companies making money by loading it with debt.

 

[ajohn]

As a public service, albeit privately owned, the regulators would have powers to prevent selling off tne assets,

Only if some factors were set into the way the company was set up. Stuff that investors would want to look at as it would influence the returns they would want.

I just mentioned pretty basic bankruptcy handling with the question of nationalising one.

Vaguely related. I finished up in a company that was sold twice. The last one's deal included must look after the pension fund. The first sale was a rather small wing of a UK company to a US one who likes to pick up emerging market start ups, working on them and then deciding to keep or sell. They sold to a Swedish company. All sorts can be written into similar deals.

 

[blup]

Only if some factors were set into the way the company was set up. Stuff that investors would want to look at as it would influence the returns they would want.

I just mentioned pretty basic bankruptcy handling with the question of nationalising one.

Vaguely related. I finished up in a company that was sold twice. The last one's deal included must look after the pension fund. The first sale was a rather small wing of a UK company to a US one who likes to pick up emerging market start ups, working on them and then deciding to keep or sell. They sold to a Swedish company. All sorts can be written into similar deals.

It looks like the authorities can serve an enforcement order but it’s only enforced by a financial penalty, TW seems to be technically insolvent but the closing the stable door after the horse has bolted seems to be the most that can be done. All because of the benefits of market forces and the positive benefits of competition. I’m not saying nationalisation is better but at least the “profits” go back to the tax payer.

 

[ajohn]

positive benefits of competition.

No national water grid. People pay who they happen to have.

 

[ajohn]

nationalisation is better

One of the problems was gov interference. Increasing prices not a good way of getting votes. Subsidies often get used. Seems our water companies have been told that they can't increase prices.

The other aspect is that they did what they were intended to do. Eg BT. Would they be into developing newer phones etc and reacting to market forces. Not seen as much of a problem now - just tell them to.

 

[blup]

One of the problems was gov interference. Increasing prices not a good way of getting votes. Subsidies often get used. Seems out water companies have been told that they can't increase prices.

The other aspect is that they did what they were intended to do. Eg BT. Would they be into developing newer phones etc and reacting to market forces. Not seen as much of a problem now - just tell them to.

I don’t buy the idea that nationalisation creates lack of investment and government interference, it’s the least worst option compared to a privatised system that prioritises profit.

 

[Notch7]

I don’t buy the idea that nationalisation creates lack of investment and government interference, it’s the least worst option compared to a privatised system that prioritises profit.

privatisation allows moral hazard

the privatised businesses dont care if it fails, it will get bailed out by the tax payer
they dont care about updating and improving infrastructure it doesnt concern them if there are terrible issues with sewage outflows.
they dont care if they have to raise bills by a massive amount

all they care about is their shareholder profits and huge salaries for the big cheeses

 

[ajohn]

all they care about is their shareholder profits and huge salaries for the big cheeses

All ok but the profits are regulated. Details around but understanding what they mean...................

 

[JohnD]

"Robert Smith, Gill Plimmer and Jim Pickard in London
5 HOURS AGO

Thames Water’s credit rating has been slashed to the lowest reaches of junk, as the company races to refinance £530mn of debt in the next 11 days to avoid collapsing into government-backed administration.

Both S&P and Moody’s cut the rating on Thames Water’s £16bn of top-ranking debt by five notches to the equivalent of CCC+ on Tuesday evening, a level that is considered highly risky and prone to default. Thames Water has to extend a £530mn credit facility from banks that falls due on October 7, if it is to stay within an updated forecast made last week of having enough cash to last into the new year."

FT.com

 

[fillyboy]

"Robert Smith, Gill Plimmer and Jim Pickard in London
5 HOURS AGO

Thames Water’s credit rating has been slashed to the lowest reaches of junk, as the company races to refinance £530mn of debt in the next 11 days to avoid collapsing into government-backed administration.

Both S&P and Moody’s cut the rating on Thames Water’s £16bn of top-ranking debt by five notches to the equivalent of CCC+ on Tuesday evening, a level that is considered highly risky and prone to default. Thames Water has to extend a £530mn credit facility from banks that falls due on October 7, if it is to stay within an updated forecast made last week of having enough cash to last into the new year."

FT.com

Do you think they might be on a cliff edge John?

 

[Andy165]

These financial people know how to screw a situation for their maximum return. The big question is , why were they allowed to run up such a massive debt, who took the money? Tories always said they were the party of good housekeeping and private companies are better at running things. Who's taken the money ? Why has the watchdog been so timid ? Easey answer, 14 years of Tory rule... profit first. October is usually the month when national financial crashes are more prevalent and the pension funds take a hammering. A "Financial reset"

 

[blup]

These financial people know how to screw a situation for their maximum return.

That seems about right

The big question is , why were they allowed to run up such a massive debt, who took the money?

The regulator must have been satisfied this was normal business practice.

Tories always said they were the party of good housekeeping

A myth put about by thathcer to create a public image she was just a housewife being careful with money. The sort of housewife that closes the local factory down, puts people on the dole and then sells off publicly owned businesses for less than market value

Why has the watchdog been so timid ?

They seem to have very limited powers, and I suspect they dont want want to be blamed for pushing TW into administration, the straw that breaks the camels back, so they pursue a light touch approach, and wait for the inevitable.

 

[ajohn]

A myth put about by thathcer to create a public image she was just a housewife being careful with money. The sort of housewife that closes the local factory down, puts people on the dole and then sells off publicly owned businesses for less than market value

She was getting all sorts off the gov's books including any debt and you could say liabilities etc. Water companies are effectively a monopoly so some of the arguments just don't hold. However some of the ideas in the game of the same name still hold. Expected profit levels should be low. This is what the regulator should look after. They may have. As they are monopolies should this have been done? Other countries have worries on water as well,

She did the same with the old house rates system. Backed from tax so she introduced the poll tax, Very unpopular but I would say fair really. So that goes and along comes council tax. A lot more than the old rates system in my case.

Council houses much the same.

Also if the gov doesn't own them subsidies wont crop up. Or shouldn't.

 

[blup]

Also if the gov doesn't own them subsidies wont crop up. Or shouldn't.

Tell that to the TOC’s

 

[JohnD]

Another water company circling the drain.

Would you lend money to someone on the verge of bankruptcy? Even if they promised you a high interest rate?

"Southern Water, the heavily indebted utility controlled by Macquarie, has turned to investors for nearly £4bn in borrowings over the next five years at a time when water companies are under increasing pressure in debt markets because of the crisis at Thames Water.

Thames Water, which itself was formerly owned by Macquarie, was last month downgraded to the lowest reaches of junk because of its dwindling cash position, increasing further scrutiny on other utilities in the sector with strained finances.

While Southern is not in the same degree of financial peril as Thames Water, its investment-grade rating and its debt covenants have both come under pressure as the group’s total debts have exceeded £6bn, according to its most recent group accounts. Of that total, liabilities related to derivatives have ballooned past £1bn.

The yield on Southern’s short-dated bonds, due in 2026, has more than doubled over the past six months to reach 13.5 per cent, as investors now require a hefty premium to hold debt that would usually offer far smaller returns due to its near maturity."