Thames Water is desperate for cash. But its board should exploit a bondholders' War

Roll up, roll up, who wants to lend £3bn to Thames Water, a company already drowning in debt? It turns out a lot of people do.

- Nils Pratley

Two rival groups of existing creditors - one representing the A class of bondholders, the other the junior Bs - have tabled proposals to provide the company with a "liquidity runway", meaning emergency cash to get it through the next year or so.

At some point in that period, it is hoped, Thames would set about the more fundamental task of imposing losses on those same debtholders to clear the decks for new shareholders to inject capital. None of this is straightforward and some of today's bondholders will probably also be tomorrow's shareholders, assuming a debt-for-equity swap is possible. And "runway" is probably the wrong metaphor. We're really talking about a sticking plaster before the main surgery on the balance sheet can begin.

But the price and design of that sticking plaster matters. It is why the board of Thames would be unwise to wed itself too tightly to the proposal it announced 11 days ago. That was from the As, who are clearly in the lead at this point and yesterday tried to rally other creditors around their plan.