ICBC contributes £47.50 million GBP to a £190 million GBP syndicated loan for the Thames Water 2019 Refinancing Project (Linked to Record ID#98905)

Project narrative

On April 1, 2019, financial close was reached on a deal in which a four banks — including the Bank of China (BOC) and the Industrial and Commercial Bank of China (ICBC) — entered into a £190.00 million GBP ($247.83 million USD) syndicated loan agreement with Kemble Water Finance Limited — a special purpose vehicle (SPV) and the intermediate holding company of the Kemble Water Holdings Group (KWH Group) that owns British water utility company Thames Water Utilities Limited — for the Thames Water 2019 Refinancing Project. This loan carried a maturity period of five years and a final maturity date of April 30, 2024. The proceeds were to be used for the refinancing of a £400 million GBP holding company bond. All four lenders, including BOC and ICBC, each contributed £47.50 million GBP ($61.96 million USD) to the loan syndicate. Record ID#98905 captures BOC's contribution. Record ID#98906 captures ICBC's contribution. In addition to BOC and ICBC, the following lenders contributed to the loan syndicate: ING Bank N.V. and Allied Irish Banks, p.l.c. (AIB). On March 28, 2024, Thames Water announced that it failed to raise the first £500 million GBP ($632.75 million USD) tranche of its £750 million GBP equity investment plan from its shareholders, China Investment Corporation (CIC), Ontario Municipal Employees Retirement System (OMERS), Universities Superannuation Scheme (USS), Hermes, and Abu Dhabi Investment Authority. Then, on April 2, 2024, Kemble Water defaulted on its debt after failing to make an interest payment due that day. As of early April 2024, despite attempts by Kemble to seek an amend-and-extend of the loan, the lenders refused to extend the maturity of the £190 million GBP loan without further injection of equity into Kemble from its existing shareholders. A debt-for-equity swap was also reportedly explored, but viewed as unlikely. It was reported that one of the lenders attempted in the previous weeks to sell out of its portion of the loan to distressed debt investors at great discount but failed to find a buyer. This led to fears that should Kemble fail repay the £190 million GBP syndicated loan due on April 30, 2024 that the lenders would become the shareholders of Kemble Water and, by extension, Thames Water. The specific role BOC and ICBC as Chinese state-owned banks in a time when Chinese investment in British critical infrastructure was being heavily scrutinized being placed in charge of Britain's largest water company raised security concerns, although state-owned sovereign wealth fund CIC was one of Kemble's existing shareholders. The Government of the United Kingdom was reportedly studying contingencies to temporarily (re)nationalize Thames Water, although reluctant to intervene unless absolutely necessary. On April 4, 2024, Fitch Ratings downgraded Kemble's credit rating to CC stating that a default of some kind appeared probable, even if the lenders agreed to extend the debt. Kemble Water's default led to fears in the British media that Thames Water, which supplies water to 25% of the British population, would either be significantly restructure or completely collapse. However, even with a change in ownership, Thames Water reported £2.4 billion GBP in equity — enough to function for 15 months — but requiring more than £3 billion GBP in equity by 2030 and higher customer bills to survive. High interest rates had negatively impacted Thames' ability to repay its £18 billion GBP debt, while inflation in labor, energy, and materials and fines from regulator Ofwat for sewage pollution and an investigation into a potentially illegal £37.5 million GBP dividend payment put pressure on Thames Water.