Thames Water’s liquidity dries up

One spurned takeover bid to start out: The chief govt of Anglo American has known as on potential suitors of the mining firm to “pay the appropriate quantity” as he defended his technique to promote 4 main elements of the enterprise within the wake of BHP’s failed takeover try.

In right now’s e-newsletter:

• Thames Water: The UK’s very personal water-gate

• Belron’s mammoth debt-fuelled dividend

• Citi will get in on personal credit score

Thames Water’s money goes down the drain

How do you lose 5 months of liquidity?

This seemingly metaphysical quandary is a really actual concern for Thames Water, its scores of collectors, 16mn prospects and British taxpayers who might foot the invoice if the nation’s largest water utility needs to be renationalised.

All of it started final Friday, when Thames Water introduced it was partaking in a light-weight spot of “contingency planning” to entry some money that lenders have been presently holding in reserve. However whereas the corporate reiterated it was sticking to a Might 2025 liquidity projection it set in July, there was an enormous catch.

Eagle-eyed readers would have seen that it tweaked the methodology to incorporate what are in impact emergency liquidity amenities that may solely be accessed in a default state of affairs.

Thames might need to take this drastic step if it’s not capable of get collectors to play ball, as a result of it will in any other case run out of money shortly after Christmas.

On Tuesday, DD’s Robert Smith and the FT’s Gill Plimmer revealed this was partly as a result of the utility is burning money at a quicker charge than it anticipated, piling strain on Thames days earlier than it has to refinance £530mn of credit score strains.

The opposite shoe then dropped the next day when S&P and Moody’s minimize the score on Thames Water’s £16bn of top-ranking debt by an epic 5 notches to the equal of CCC+, with each companies citing liquidity issues.

Even DD’s seasoned credit score market readers will be capable to consider just a few examples of firms going from investment-grade to triple C in two months.

S&P was clearly unimpressed by Thames Water’s semantics across the Might 2025 money projection: the company additionally downgraded its evaluation of the utility’s “administration and governance” to “damaging”, citing “deficiencies within the liquidity threat administration”.

The headline of the FT’s Lex column summed up the temper on Thursday: “Thames Water’s credibility is disappearing with its money.”

Non-public fairness heads to the ATM machine

Some $1tn-plus in offers have been struck in 2021 as ultra-low rates of interest propelled personal fairness dealmaking to stratospheric heights.

The trade was left with a brain-crunching hangover as buyout executives spent latest years listening to calls from buyers for his or her money again and triaging stretched steadiness sheets after a pointy rise in rates of interest.

However money is beginning to trickle again into buyers’ pockets at the same time as dealmaking and flotation exercise stays lacklustre. The key? Dividend recapitalisations. This 12 months’s shaping as much as be stuffed with the manoeuvres, during which buyout corporations finance a big distribution to buyers.

Belron, a windscreen restore firm backed by Clayton, Dubilier & Rice, Hellman & Friedman, BlackRock and GIC, is engaged on what dealmakers say is the most important debt-financed dividend within the historical past of the $4tn personal fairness trade.

Belron, which owns the Safelite model within the US and Autoglass within the UK, is in talks with lenders to lift €8.1bn by new bonds and loans, with €4.4bn earmarked for a dividend to its buyers, DD’s Antoine Gara, Eric Platt and Alexandra Heal report.

Different massive latest debt-financed payouts embody Brookfield-owned railroad Genesee & Wyoming and Blackstone and Warburg Pincus-backed monetary know-how group IntraFi.

The payouts come at a time when buyout teams have struggled to return money to their buyers due to gradual dealmaking exercise.

And Belron has emerged as one of many PE trade’s most original offers.

CD&R purchased a 40 per cent stake within the firm from Belgium conglomerate D’Ieteren Group at a €3bn valuation in 2018, however cashed out just a few years later in a fancy deal that valued the windshield restore firm at a staggering €21bn. (For extra concerning the mechanics of the deal, learn the FT’s deep dive.)

If the deal is accomplished, buyers can have had 35 per cent of their authentic capital returned by dividends, folks acquainted with the plans inform DD, and Belron’s debt will almost double to virtually €9bn.

Buyers are getting money again — albeit on the expense of Belron’s steadiness sheet.

Citi and Apollo group up on personal credit score push

Partnerships between monetary establishments can typically result in unlikely reunions.

When BlackRock agreed to purchase World Infrastructure Companions earlier this 12 months, Larry Fink and GIP chair Adebayo Ogunlesi have been introduced again collectively after first working at Credit score Suisse within the Nineteen Eighties.

This week, the same reunion of kinds performed out between Citigroup and Jim Zelter, the co-president of Apollo’s asset administration arm, who spent greater than a decade on the financial institution earlier than becoming a member of the buyout group in 2006.

On Thursday, Citigroup and Apollo introduced they’re teaming up on a $25bn push to lend to non-public fairness teams and lower-rated firms, because the fourth-largest US financial institution by belongings tries to get a foothold within the personal credit score trade.

The duo plans to finance the $25bn value of offers over a handful of years, with the hope of investing $5bn within the first 12 months.

Whereas the partnership is likely one of the greatest between a conventional financial institution and different asset supervisor, Citi is on no account the primary old-school financial institution to attempt to get in on the booming enterprise of personal credit score.

A 12 months in the past, Wells Fargo and Centerbridge acquired collectively for a $5bn fund to spend money on personal loans. And in April, Barclays unveiled a partnership with funding group AGL to offer personal loans to its shoppers.

As banks have tried to keep away from the riskier corners of the market, asset managers noticed a chance to chip away at among the extra profitable elements of the lending enterprise. Now, banks try to claw again a few of that territory.

Citi’s funding financial institution had an enormous coup not too long ago by advising Mars on its $36bn acquisition of snack firm Kellanova. But it surely’s usually lagged behind rivals in any other case.

Getting in on personal credit score might give the financial institution the jolt it wants.

Job strikes

• Chevron will comply with exclude John Hess, the chief govt of Hess, from its board if required by US regulators to be able to get the merger of the 2 firms permitted, mentioned folks acquainted with the matter.

Sensible reads

7-Eleven’s suitor Alain Bouchard, who opened up Couche-Tard’s first comfort retailer, is technically retired, the FT reviews. However as govt chair, he’s a driving power behind the corporate’s bid for 7-Eleven.

Company warcraft Bobby Kotick, the previous chief govt of Activision, and Mike Morhaime, the co-founder of Blizzard Leisure, have been an unlikely and unstoppable pair, Bloomberg writes. Then the issues began.

FBI goal Shan Xiangshuang’s $10bn buyout group stealthily turned one of many greatest buyers in Silicon Valley, the FT reveals. Then the FBI caught on.

Information round-up

Commerzbank to carry first assembly with UniCredit on Friday (FT)

Employees getting share in windfalls as personal fairness corporations soften picture (FT)

Northvolt to be served ‘suspicion of gross manslaughter’ discover over employee demise (FT)

SoftBank-backed fantasy sports activities start-up accused over unlicensed playing (FT)

FCA chair says he is not going to stop over whistleblower mishandling (FT)

Stumbling Stellantis units up new hurdle with effort to interchange CEO Tavares (FT)

Rolls-Royce and US rivals enter closing stretch to construct Britain’s first mini nuclear reactors (FT)