Moody’s cuts Thames Water’s highest-ranked bonds to junk

Moody’s Ratings lowered Thames Water’s class A debt to junk after the UK’s water regulator placed the company under a so-called turnaround oversight regime.

The senior secured debt of Thames Water Utilities Finance Plc was downgraded to Ba1, one notch into junk territory, according to a report on Wednesday. Meanwhile, the class B notes were downgraded to B3, and the corporate family lowered rating to Ba2. The company’s credit outlook remains negative.

A downgrade pushes up borrowing costs, limits access to capital and potentially could even breach the terms of Thames Water’s operating license, adding to the troubled company’s woes.

Heavily-indebted Thames Water will be monitored by Ofwat to ensure the firm can fix chronic leaks and sewage spills, according to a draft ruling by regulator Ofwat earlier this month. The UK’s biggest water and sewage company could be broken up, listed on the stock exchange, or forced to cap its debt.