“Thames Water is a utility with a whole-business securitisation debt-funding structure. Our debt is organised in three categories:
“During the COVID-19 period, utilities have been seen as being at the safer end of the spectrum – so that’s helped us raise quite a bit of funding over the past year, both in the capital markets and through some bank lending.
“For example, we did a number of privately placed Class A medium-term notes in sterling, euros and dollars, including green private placements in dollars. We have also done a Class B bilateral facility with one of our relationship banks, which is over and above our normal revolving credit facility (RCF).
“We’ve got an RCF with our relationship bank group, which is primarily a Class A revolver, but it has a tranche of Class B, and we managed to extend the maturity of that by one year.
“In addition, we’ve done some HoldCo private placements – and we did a public bond issuance at HoldCo for £250m in November. That was well-timed, in that it was the day that a vaccine was announced, so there was some positive momentum in the markets.”
“We have a roughly £500m debt portfolio, of which about £200m is undrawn. Our debt is predominantly bank debt, and we also have capital market debt that is accessed through an aggregator. In terms of duration, our debt ranges from five-year RCFs up to 30-year fixed-rate debt.
“We have raised quite a bit of finance in the past 18-24 months, since I joined Golding Homes in 2019. We had an updated business plan to deliver an ambitious development programme and Brexit was looming, so people weren’t sure which way the funding market would go. Within eight months in 2019 we entered into two new relationships raising £200m in new debt and expanded some of the facilities with our existing lenders.
“Since then, we have put in place another standby liquidity agreement. We’re a founding shareholder of MORhomes, an aggregator owned by more than 60 housing associations, and which raises finance on the bond markets and lends it to those housing associations. We haven’t borrowed through them as yet, but we have a standby liquidity agreement – so if I want to go to the market tomorrow and borrow £50m, I can do that fairly quickly.
“This is a valuable vehicle to access borrowing from bond markets at a faster timescale on flexible terms with the option to draw down funds up to 12 months earlier than the security is charged.
“Looking to the next 12 to 18 months, we have got a fully funded business plan, so we are in a comfortable position and there is no immediate need for us to borrow.
“Having said that, we will always keep an eye on the market and seize the opportunities to ensure that we have sufficient liquidity in place while minimising carry costs – it’s always important to think of the future.”
“Our capital structure is a mix of bank debt, mainly consisting of our RCF, together with euro and sterling bonds.
“We have carried out plenty of financing activity during the crisis. In terms of our RCF, we extended the facility by 18 months to September 2023 to remove any medium-term refinancing risk. We also had to agree a series of covenant waivers and amendments, which we have done through to the end of December 2022.
“We also secured funding via the COVID-19 Corporate Financing Facility, which we repaid in March this year. And in October we carried out a sterling and euro bond issuance, in conjunction with a tender offer on one of the sterling bonds that was maturing in 2022.
“Essentially, we’ve done everything we need to do to get us through this period, so we won’t need to do any financing until next year, when we will refinance our RCF. Other than that, we don’t have any immediate bond maturities until November 2022.”
Rebecca Brace is a freelance journalist specialising in treasury and banking
This article was taken from the Issue 2, 2021 edition of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership