Thames Wat.u 35 Regulatory News (AW14)

Thames Water Utilities Limited

13 December 2024

Liquidity Extension Update

Thames Water Utilities Limited announces increased creditor support and a proposed amendment to its liquidity extension transaction

Chris Weston, CEO, Thames Water said: "We remain focused on stabilising the business and today's announcement is yet further demonstration of the support of our creditors and the progress we are making to increase the company's long-term financial resilience. We continue to work collaboratively with our many stakeholders to recapitalise our business and attract new equity. We look forward to receiving our final determination, a fundamental element of our turnaround and of our ambitious business plan for the next five years."

Thames Water Utilities Limited ("TWUL") launched a consent process for a transaction support agreement ("TSA") in connection with a liquidity extension transaction (as set out in a term sheet appended to the TSA) ("Liquidity Extension Transaction"), a related backstop agreement in relation to an initial tranche of super senior funding (the "Backstop Agreement") and related STID Proposals on 25 October 2024. Thames Water Utilities Holdings Limited ("TWUHL") issued a practice statement letter on 22 November 2024 (the "PSL") which provided creditors with notice of a convening hearing in connection with implementing the Liquidity Extension Transaction via a restructuring plan under Part 26A of the UK Companies Act 2006 (the "Restructuring Plan").

Following the launch of the TSA, TWUL has continued its discussions with committees of Secured Creditors together representing a substantial majority of TWUL's Secured Debt and, following such discussions has today proposed an amendment to the TSA in relation to the treatment of certain hedging agreements (as set out further below).

At the time of this announcement, creditors representing over 75% of the Class A Debt (Make-Whole) Providers, the Class A Debt (Non-Make-Whole) Providers and the Currency Hedging Providers have acceded to the TSA.

Based on the discussion to date and provided that the proposed amendments to the TSA (described below) are approved, TWUL expects that creditors representing over 75% of Interest Rate and Index Hedging Providers and the Liquidity Facility Providers would shortly thereafter accede into the TSA.

Updated Liquidity Extension Transaction Terms

It is proposed that the TSA and the Term Sheet appended to the TSA are updated to reflect the position set out below (the "Proposed Amendment"):

· Fees

o  The consent fee in respect of the mark-to-market of the Interest Rate and Index Hedging Providers who accede to the TSA by the record date for the Restructuring Plan (the "Record Date") would be 0.75% (payable as CF debt as set out in the Term Sheet).

o  In addition, a fee of 3% in respect of the Record Date mark-to-market of the Interest Rate and Index Hedging Providers of which:

§ 1.5% would be payable in cash following implementation of the Restructuring Plan (provided the relevant Interest and Index Hedging Provider is a Consenting Creditor under the TSA);

§ the remaining 1.5% would be payable in cash following the implementation of any more holistic recapitalisation transaction, unless:

· the transaction is implemented by way of restructuring plan and (if afforded the relevant vote) the relevant class of Interest Rate and Index Hedging Providers do not vote in favour of such restructuring plan (voting as a class); or

· that Interest and Index Hedging Provider exercises a termination or close out right which arises directly and only as a consequence of a restructuring plan required to implement such holistic recapitalisation transaction.

o  An additional 1.00% fee per annum would accrue in respect of the Interest Rate and Index Hedging Agreements which are outstanding on the Record Date (calculated by reference to the mark-to-market on the Record Date and each anniversary thereafter). Initially the fee would accrue until the earlier of the completion of a Recapitalisation Transaction or the end of the stable platform period at which time the fee would be payable. Thereafter this fee would continue to accrue and be paid in cash semi-annually until the Investment Grade Condition (as defined below) is met.

· Breaks

o  If elected by an Interest Rate and Index Hedging Provider, a break would be included within the relevant Interest Rate and Index Hedging Agreements which is mandatory or exercisable (at the option of the relevant Interest Rate and Index Hedging Provider) on and from 31 December 2028 if TWUL and/or TWUF does not at that time or any time thereafter have an issuer credit rating, Class A debt rating or a corporate family rating from at least two Rating Agencies which is an investment grade rating (the "Investment Grade Condition").

o  TWUHL, TWUL and TWUF will agree to engage with Interest Rate and Index Hedging Providers in connection with any holistic recapitalisation transaction. If elected by an Interest Rate and Index Hedging Provider, a break would be included within the relevant Interest Rate and Index Hedging Agreements which is either mandatory or exercisable (at the option of the relevant Interest Rate and Index Hedging Provider) on 1 April 2030 if there is a holistic recapitalisation transaction unless:

§ such transaction is implemented by way of a restructuring plan in which the Interest Rate and Index Hedging Providers are a separate voting class or classes of creditors (other than where all Class A Creditors do not have a right to vote on the restructuring plan), or

§ the relevant Interest Rate and Index Hedging Provider provides its consent to such transaction.

· Interest Rate and Index Hedging Providers will have the ability to transfer their Hedging Agreements without the consent of TWUL (or, as applicable TWUF) following implementation of a more holistic recapitalisation transaction (subject to the transferee meeting minimum rating requirements of at least A-3 from Moody's, A- from Fitch or A- from S&P).

A presentation summarising these terms and setting out further information on the portfolio of Interest Rate and Index Hedging Agreements can be found here:

http://www.rns-pdf.londonstockexchange.com/rns/1042Q_1-2024-12-13.pdf

The terms of the Liquidity Extension Transaction and Backstop Agreement announced on 25 October 2024 and as set out in the PSL will only be amended as described above if the Proposed Amendment is consented to by the requisite majority of parties under the TSA. TWUL will update creditors if the Proposed Amendment becomes effective.

In order to amend the TSA, consent is required from:

· Super Majority AHG Consenting Creditors (i.e. AHG Members holding at least 75% of locked-up Class A debt held by all AHG members);

· Super Majority Bank Group Consenting Creditors (i.e. bank group members holding at least 75% of locked-up debt (i.e. locked-up Class A, Class B and swaps debt) held by the bank group); and

· Majority New Money Backstop Providers (i.e. backstop providers holding at least 75% of the total backstop commitments).

As at the date of this announcement approximately 50% (AHG Members), in excess of 75% (bank group members) and approximately 50% (backstop providers) respectively have provided consent in principle and a process is ongoing to facilitate the remaining consents.

If the Proposed Amendment is implemented the terms of the Liquidity Extension Transaction as set out in the PSL will, other than as described above, remain unchanged.

Access to Documents

The proposed amendment to the TSA is available through the website set up by Kroll Issuer Services Limited (the "Lock-Up Agent" and the "Information Agent") at https://deals.is.kroll.com/thameswater. The website is available to creditors and prospective buyers, transferees, or sub-participants of that debt (or similarly interested party). Creditors should contact the Lock-Up Agent and Information Agent at thameswater@is.kroll.com with questions on how to approve the amendment to the TSA and/or accede to the TSA.

STAKEHOLDERS ARE ENCOURAGED TO REVIEW THE PROPOSED AMENDMENT TO THE TSA IN DETAIL THEMSELVES (COPIES OF WHICH ARE AVAILABLE AT HTTPS://DEALS.IS.KROLL.COM/THAMESWATER) AND SEEK THEIR OWN LEGAL AND FINANCIAL ADVICE[1] SHOULD THEY HAVE ANY QUERIES IN RELATION TO THEIR CONTENTS.

For further information

Investor enquiries

Frederick Maroudas - Director of Corporate Finance debt.investorrelations@thameswater.co.uk

Media enquiries

Suvra Jans - Head of Media Relations suvra.jans@thameswater.co.uk M: 07747 640 810

Information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 as amended and as it forms part of United Kingdom domestic law ("UK MAR") until the release of this announcement. For the purpose of UK MAR and Article 2 of Commission Implementing Regulating (EU) 2016/1055 as it forms part of United Kingdom domestic law, this announcement is made by Chris Weston (Director) at Thames Water Utilities Limited.

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