Thames Water’s credit rating downgraded to ‘junk’ status

Thames Water has had its credit rating downgraded to “junk” status by influential ratings agency Moody’s.

The downgrade for Thames Water bonds indicates the credit agency firm thinks the utilities company is likely to default on its debt and may add to its financial pressures.

It comes weeks after regulator Ofwat said it will impose a “turnaround oversight regime” on Thames Water.

The regulator also opposed the utility firm’s planned 44% rise in consumer bills over the next five years, telling Thames Water it should instead increase average yearly bills by 23% to £535 over the period.

On Wednesday, Moody’s said the company could struggle to find new investment following the plans announced by Ofwat.

Management is engaging with investors and its creditors and remains committed to seeking new equity funding and exploring all options to extend its liquidity runway

As a result, it dropped Thames Water’s credit rating from Baa3 – an investment grade rating which makes it easier to access funding – to Ba2, a “junk” rating status.

Moody’s said it maintained a “negative outlook” for the business and its debt.

The company said in response that it is seeking new “equity funding” opportunities to keep it operating.

In a statement, Thames Water said: “ Management is engaging with investors and its creditors and remains committed to seeking new equity funding and exploring all options to extend its liquidity runway.

“In the meantime, it’s business as usual for our customers and our teams on the ground who will continue to supply our services and remain focused on the delivery of our turnaround plan.”

Earlier this month, Thames Water has warned that it will run out of money by the end of next May.

Britain’s biggest water firm, which is creaking under a debt pile of more than £15 billion, said on Tuesday that it had £1.8 billion of cash reserves at the end of June.