Thames Water and its lenders are spending millions of pounds a week on management consultants and bankers amid a cash crisis at the struggling utility company.
Britain’s biggest water supplier is scrambling to shore up its finances after its parent company, Kemble, defaulted on its debts and shareholders refused to provide new funding.
Taxpayers could be left to foot the bill if the Government has to bail out the debt-laden company, which has 16million customers.
Half a dozen firms are advising the beleaguered firm and its associates, it emerged yesterday. Kemble has reportedly hired turnaround firm Alvarez & Marsal to convince lenders to hand over more money.
Meanwhile, Big Four accounting firm EY is advising a group of Kemble lenders on recovering £190million, according to the Sunday Times.
Rothschild, the investment bank, has been hired to advise Thames Water on how to deliver its reform plan, while consultancy firm Teneo has been appointed as ‘administrator in waiting’ to take over in the event of a collapse.
The utility, which provides water to millions of households in London and the South East, risks falling into special administration if it cannot find extra funds.
It brought in restructuring firm AlixPartners last year to advise on plans, and law firm Slaughter and May was hired to advise on financing proposals.
This comes amid public outrage over Thames Water and the wider industry’s poor customer service, and sewage leaks into rivers and waterways.
Thames Water had looked for fresh funding from its shareholders but that was dependent on water regulator Ofwat approving its turnaround plan, which included a 40 per cent rise to customers’ bills.
Ofwat blocked the increase and refused to ease capital spending requirements and waive fines for not meeting targets. Thames Water declined to comment.
According to a property expert, houses with certain names command an impressive sale price often well over one million pounds.
Lucian Cook, head of residential research at Savills, has revealed that homes abodes with certain names are highly sought after by buyers.
More traditional names like The Manor House, The Old Rectory and The Vicarage took first, second and fourth place respectively on the table of high value names of properties.
Mr Cook said: “Once home to those with the highest status in society, the likes of The Manor House, The Old Rectory and The Old Vicarage, still command the highest house prices, fending off the competition from more contemporary names such as Mallards and Timbers.”
According to Savills, over the past five years, The Manor House named properties have commanded a £1,400,000 price tag, on average. More than two in every five sales is worth more than £1 million pounds, almost four times more than the average house price in England and Wales.
Houses called The Old Rectory sold with an average price tag of £1,301,424. Half of the properties sold with this name over the past five years have been valued at over £1 million.
Over the same period, properties called The Vicarage have sold at an average price of £1,086,887, although fewer sales have been over £1 million, 39 percent.
Mr Cook added: “Certain English house names have held steady over hundreds of years, and tell us a lot about the provenance and history of the property, whether it be related to the feudal system, religion, mythology, our nation’s flora, and even beer.
“Still today, house names instantly conjure an image, whether it’s the distinctive roof line of an Oast House or the intricate timbers within a Tithe Barn.”
Ranked by number of sales in past five years, average value (£) and percentage over million.
THE MANOR HOUSE – 56… £1,423,128… 43 percent
(THE) OLD RECTORY – 355… £1,301,424… 50 percent
MALLARDS – 38… £1,164,150… 24 percent
(THE) OLD VICARAGE – 325… £1,086,887… 39 percent
THE OAST HOUSE – 31… £1,038,774… 45 percent
LIME TREE HOUSE – 33… £981,121… 21 percent
MANOR HOUSE / THE MANOR – 204… £967,117… 29 percent
MANOR FARM HOUSE – 41… £966,235… 32 percent
GROVE HOUSE – 68… £962,904… 25 percent
GLEBE HOUSE – 86… £940,814… 31 percent
Rising debt costs and shrinking valuations are forcing major commercial property developers to sell millions of dollars worth of assets.
Precinct Properties has sold about $700m worth in the past 18 months, while hospital developer Vital Healthcare has sold $220m worth and Argosy just sold $20m worth.
“When interest rates revert as fast as they have, and when values come down, and we’ve seen in our business probably 7 or 8 per cent reduction in values, then you’ve got to stay in front of it,” Precinct CEO Scott Pritchard told Markets with Madison.
“We’ve been managing our levels of debt through asset sales and through capital partnerships and through raising new capital.”
The largest listed office developer and owner had drawn down $1.1 billion worth of debt, paying an average interest rate of 5.3 per cent – surprisingly less than most mortgagors.
That’s because it didn’t just rely on banks for funding. Precinct was now partnering with offshore investors including Singapore sovereign wealth funds, private equity firms and high net worth individuals.
“The key is to have a really diverse source of funds and to have a really laddered maturity profile, which is all the lessons that a lot of businesses learned out of the GFC to be honest.
“If we get other sources of capital to invest alongside us, it means we can do more things and ultimately drive a higher return for our shareholders.”
It was a strategy Vital was now considering too – seemingly a potential funding solution in a higher interest rate environment.
Pritchard said offshore investors were especially keen on residential property, which was driving Precinct’s push into developing apartments on Auckland’s waterfront.
But would that impact Precinct’s future net rental income, currently earned on offices?
Watch Scott Pritchard discuss how developers are managing debt in today’s episode of Markets with Madison above.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.