Kemble under pressure over Thames securitisation
- From: Vol 8, Issue 7 (July 2007)
- Category: General
- Region: Europe
- Related Companies: Barclays Capital, Kemble, Macquarie and Thames Water
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The secured debt package to refinance the Thames Water acquisition may cost the Kemble consortium more than it had bargained for. Andrew Cavenagh reports.
The Kemble consortium is under some pressure to launch its much-anticipated £4.5 billion securitisation, with which it will refinance most of the acquisition debt for Thames Water, before mid-September.
If the Macquarie-led group fails to meet this deadline, it will have to seek the consent of those holding £1.2 billion of Thames bonds that were issued just ahead of the October 2006 takeover to transfer their instruments into the securitisation structure. Provided the refinancing is completed within 12 months of the previous bonds having being issued, no such consent will be necessary – but the bondholders may well make Kemble pay if it is not completed within the stipulated timeframe.
“They run the risk otherwise of having to pay those bondholders a few basis points more,” confirmed Neil Beddall, utilities analyst at Barclays Capital.
A rating agency analyst working on the transaction added that Kemble would also need to complete the deal “sooner rather than later” in order to avoid the danger that investors will start demanding a premium for risks associated with the next regulatory pricing review.
Kemble is understood to have put about £1.2 billion of subordinate finance in place to refinance part of the acquisition debt, in the form of bank debt that was syndicated privately to hedge funds – at a cost of about 350 basis points over Libor.