Source: Sharecast
According to Sky News, environment secretary Steve Reed has signed off the appointment of FTI Consulting to advise on contingency plans for Thames Water to be placed into a Special Administration regime (SAR).
Sources told Sky on Tuesday that the advisory role established FTI Consulting as the frontrunner to act as the company's administrator if it fails to secure a private sector bailout - although approval of such an appointment would be decided in court.
Thames Water, its largest group of creditors and industry regulator Ofwat have been locked in talks for months about a deal that would see its lenders injecting about £5bn of new capital and writing off roughly £12bn of value across its capital structure.
The discussions are understood to be progressing constructively, Sky said, although they appear to rely in part on the prospect of the company being granted forbearance on hundreds of millions of pounds of regulatory fines.
A government spokesperson told Sky on Tuesday: "The government will always act in the national interest on these issues.
"The company remains financially stable, but we have stepped up our preparations and stand ready for all eventualities, including applying for a Special Administration Regime if that were to become necessary."
Sky said insiders stressed that FTI Consulting's engagement by the Department for the Environment, Food and Rural Affairs (DEFRA) did not signal that Thames Water was about to collapse into insolvency proceedings.
A SAR would ensure that customers would continue to receive water and sewage services if Thames Water collapsed, while putting taxpayers on the hook for billions of pounds in bailout costs - a scenario the chancellor, Rachel Reeves, is keen to avoid at a time when the public finances are already severely constrained.
Insiders told Sky the SAR process can only be instigated in the event that a company becomes insolvent, can no longer fulfil its statutory duties or breaches an enforcement order.
