Thames Water sees £1.8bn of demand for new sub bond

Thames Water visited the subordinated bond market this afternoon for the second time in under two months, raising £300 million of 20-year non-call 12 Class B notes, complementing the £550 million shorter-dated issue which priced in mid-July.

The new issue drew £1.8 billion of investor interest at the pricing level of 250 basis points over the 4% 2022 Gilt. 130 accounts placed orders for the paper, including some which had had their allocations cut back on the earlier Class B deal.

The aggregate proceeds of approximately £850 million (equivalent to around 10% of Thames’ regulatory capital value) will enable the company to pay down a significant portion of the acquisition debt raised at the holding company level when Macquarie bought Thames in 2006. The new deal will also nudge the net debt to RCV level within the regulatory ring-fence further towards the 85% maximum stipulated by the ratings agencies.