Water firms bailed out

Sunday, April 26, 2009

THREE of Britain’s biggest water companies have received emergency cash injections from their buyout backers to keep them from breaching debt agreements.

Southern Water, Anglian Water and South East Water were bought in debt-fuelled deals totalling more than £7 billion at the top of the private equity boom in 2006.

The economy’s slowdown put them at risk of breaching loan terms as the value of their assets, linked to the Retail Prices Index (RPI) fell.

The firms have received, respectively, £85m, £115m, and £15m in the past month.

The cash calls are another setback for the buyout and infrastructure firms that paid huge prices to get into the sector but are now short on cash themselves.

These include troubled private-equity company 3i, part of the consortium behind Anglian. Swiss bank UBS and Vincent Tchenguiz’s Consensus Business Group backed Southern Water. Hastings, an Australian infrastructure investor, bought South East Water.

Water company assets are valued every March using several factors including RPI. Last month the RPI fell to -0.4% from a 5.5% high in September, leading to a jump in the levels of debt relative to the cheaper assets.

This story was featured on The Times Website.

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