Ratings agencies downgrade Thames Water further into ‘junk’ status

Credit agencies Moody’s and S&P have downgraded Thames Water’s debt rating even deeper into junk status, in a fresh blow to the struggling utility.

The agencies have both cut their ratings for the water company after it said much of its day-to-day funding will run out in December, with further cash access dependent on getting permission from its creditors.

Moody’s downgraded Thames Water to a Caa1 rating, down from a Ba3-PD. The drop signifies that it is a very high-risk company, and is likely to default on its debts.

The ratings firm said the cut “reflects a significantly tighter liquidity position than previously expected”.

S&P, meanwhile, lowered its rating on Thames Water’s class A debt to CCC+, which indicates a similar verdict on the company.

The agency wrote that it is likely the water firm “will default in the next 12 months without any material positive developments”.

The moves come after the utility giant said it will kick off the process of raising more money from investors over the next few weeks.

Thames Water, which serves about 16 million people, faces a funding crisis, with only enough cash to continue operating until May 2025.

It also has more than £15 billion of debt, and regulator Ofwat has said it intends to appoint an independent monitor to supervise the company as it attempts a turnaround.

If Thames Water does not raise fresh cash, it faces a potential nationalisation next year, something the Labour Government has said it is keen to avoid.

The company is also in talks with a group of roughly 90 of its creditors, who represent about £10 billion of its total debt.

The group, which includes large asset managers, hedge funds and pension funds, is also understood to be drawing up a plan to keep the company afloat.

A Thames Water spokesperson said: “We continue to operate to the undertakings agreed with our regulator in July 2024 following the reduction in our Class A debt rating to sub-investment grade and we continue to engage with creditors to consider options for the extension of our liquidity runway.”