Whoever takes over Thames will face a huge challenge

Fifteen times a year, the sheer volume of waste water entering Thames Water's Mogden sewage works in southwest London overwhelms its 90-year-old concrete tanks, forcing the utility to pump excrement into the River Thames.

- Sarah Young and Paul Sandle, Reuters

Hidden by woodland, the plant illustrates the crisis at Thames, which supplies water and sewage services to 16 million customers in southern England. Loaded with debt after being privatised in 1989, the company is struggling to survive, let alone get to grips with the crumbling facilities in its care.

US private equity firm KKR this month walked away from a plan to inject 4 billion pounds ($5.4 billion) of equity, leaving Thames' fate in the hands of senior creditors now negotiating a rescue deal with water regulator Ofwat.

The group including investment grade lenders and hedge funds has offered to invest 5 billion pounds of new equity and debt and write off around 20% of the value of their existing debt, in return for a reset of the environmental and investment regime. Without a deal, the British government already struggling with constrained public finances may have to take control of a business that caused outrage by polluting waterways while paying dividends and bonuses to its previous owners and managers.