Mark Kleinman: Well runs dry for Thames Water creditors
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his City PM column
Well runs dry for Thames Water creditors
Are Thames Water’s taps about to run dry? Not literally, of course – but Andy Burnham’s arrival in Downing Street has fired the starting gun on a creditor sprint to avert the prospect of Britain’s biggest water utility seeping into public ownership.
The new prime minister’s cost-of-living pronouncements in the 72 hours since he replaced Sir Keir Starmer imply that patience in Whitehall has run out over the Thames Water crisis. Burnham had already spoken of a desire for greater public control of water companies, and briefings that a special administration regime for Thames had become his preferred option – despite the potential cost to taxpayers – suggest that, legal processes permitting, it may now be a fait accompli.
Of course, Thames Water cannot blame anyone other than itself for this scenario, given its appalling environmental and performance records over recent years. Its propensity to shoot itself in the foot was spotlighted again last week when its annual report revealed that chief executive Chris Weston earned a bigger pay package in the last financial year than he did in the previous one. The optics were desperate: a company desperate to persuade government and regulators that it should structure a rescue with private capital amid political and public outrage thought it appropriate to take its boss’s remuneration through the seven-figure mark.
As the outcry from politicians ranging from Emma Reynolds, the former environment secretary, and Reform’s deputy leader, Richard Tice, has shown, the board’s myopia has just made the London & Valley Water consortium’s job that little bit tougher.
This week’s almost-plaintive statement from the creditors pledging to work with the Burnham administration and offering the government a golden share in Thames Water underlines the conviction among some of the participating investors that this is now the last chance to persuade Whitehall not to pursue a SAR.
Their revised proposal, to be submitted imminently, will contain a number of other sweeteners in relation to equity, debt and governance. Burnham’s rhetoric suggests this ought to be their best and final offer – now’s the time to dig deep if they want to avoid what, for them, would be Armageddon.
Selling the Atom proves too tough for bankers
It was three months ago that I posed the question in this column about whether splitting the atom might be an easier task than selling a bank of the same name.
The answer, as it turns out, appears to be yes. Bankers at Jefferies have all but drawn stumps on an auction which investors were hoping might value it at up to £800m.
Amid a frenzy of interest in neobanks, Atom’s list of suitors proved surprisingly thin. A couple of building societies had a perfunctory look but pulled out, while I understand that a European private equity firm also expressed an initial interest but didn’t progress to an offer.
The most serious party appears to have been Pollen Street Capital, the private equity backer of Tandem Bank, although again a formal bid has yet to materialise.
That leaves Atom Bank’s shareholders, led by BBVA and Toscafund, in something of a bind. The business, the latest in a string of ventures founded by financial services entrepreneur Anthony Thomson, launched in 2016 and now seems to be valued at little more than the sum of the equity it has raised since it was founded.
Based in Newcastle, it has roughly 250,000 customers – a fraction of the numbers boasted by rivals such as Monzo and Starling Bank.
Given the dearth of interest, a more sensible approach might now be for shareholders to sit tight and wait for regulators to approve the internal ratings-based (IRB) framework that Atom Bank has long been seeking a green light for.
Until that happens, though, a continuation of its pedestrian performance looks inevitable. A change of leadership is about the best short-term Atom(ic) reaction investors can hope for.
Interpath rumour mill sets the Wright path for ex-KPMG unit
London’s insolvency community has been abuzz over the last week with speculation about the leadership of Interpath Advisory, the former restructuring arm of KPMG UK.
That’s because corporate filings earlier this month showed Will Wright, who runs the firm’s UK business, has ceased to be a director of various entities within the Interpath structure.
Wright has acted as administrator to companies including Global Counsel, the advisory firm set up by Peter Mandelson, the disgraced former Labour peer and ex-British ambassador to the US.
Suggestions within the industry that Wright is leaving are, I’m told, wide of the mark. He has, alongside EMEA chief Barouma Bacoum, simply stepped down as a director of Interpath’s holding company and its subsidiaries after Bridgepoint, its new private equity owner, decided to streamline the company’s board.
Mark Raddan, chief executive, and Ruairidh Cameron, the finance and operating chief, occupy the only two executive seats on the board, amid a renewed focus on growing the business internationally.
Bridgepoint’s £800m acquisition of Interpath came at what might come to be regarded in hindsight as a high watermark for professional services firm valuations. Yet with corporate debt levels continuing to rise, interest rates remaining higher for longer and UK insolvencies expected to reverse their surprising recent decline, there might still be enough juice left for Interpath’s new owners to squeeze.