Thames Water Utilities Holdings Ltd, Re

The Court considered an application under Part 26A Companies Act 2006 to convene creditor meetings and to sanction an interim restructuring plan (the "Plan") effecting an "Interim Platform Transaction" to extend maturity dates, cancel undrawn commitments and provide £1.5bn new super‑senior funding. Key legal principles applied included the Part 26A jurisdictional threshold (s.901A), the voting and sanction provisions (s.901F) and the cross‑class cram‑down power and its two statutory conditions (s.901G): the "no worse off" test (Condition A) and the requirement that an in‑the‑money class has approved the plan (Condition B).

The Court found the relevant alternative most likely to occur if the Plan failed was special administration under the Water Industry Act 1991 and associated special administration regime (the "SAR"). Applying the no worse off test the judge accepted the Plan Company’s valuation evidence (adopting the mid‑range of the Plan Company’s expert) and concluded dissenting Class B and subordinated creditors would not be any worse off than in the SAR.

The Court rejected a challenge that certain contractual "Class A control" provisions (notably the June Release Condition) unlawfully distorted competition or amounted to an improper diversion of value; on construction and factual assessment the provisions did not confer an unqualified power to divert value or to veto RP2 in a manner that would breach competition law. The Court also rejected challenges to information rights and to the breadth of releases, but permitted parties to address precise drafting for consequential relief.

Balancing the public interest (continuity of water services) and creditor interests, the Court exercised its discretion to sanction the interim Plan and to permit consequential applications on limited drafting matters.

The Plan Company applied for orders under Part 26A CA 2006 to convene meetings of its principal creditors and to sanction an interim restructuring plan (the "Plan") comprising an "Interim Platform Transaction" to extend maturities by two years, cancel undrawn commitments and provide £1.5bn new super‑senior funding (with an accordion to £3.0bn). The Plan Company said the Plan was needed to extend its liquidity "runway" to permit a substantive Recapitalisation Transaction (equity raise / RP2) to be implemented; otherwise it would run out of cash and the most likely alternative would be entry into special administration under the Water Industry Act 1991.

• Parties and procedure: The Convening Hearing (Trower J) permitted creditor meetings; on 21 January 2025 most Class A creditor classes approved the Plan but Class B and the sole subordinated creditor rejected it. The Plan Company sought sanction and cross‑class cram‑down of those dissenting classes. The Court heard extensive factual and expert evidence (valuation, restructuring execution and insolvency) and submissions over several days.
• Issues framed: (i) jurisdiction and whether the statutory thresholds for Part 26A were satisfied; (ii) the relevant alternative for s.901G and the no worse off test; (iii) valuation disputes between experts; (iv) whether contractual "Class A control" terms (notably the June Release Condition and related amendments to the Finance Documents) improperly diverted value or restrained competition; (v) whether there was a "blot" (including competition law infringement) or unfair releases; and (vi) exercise of the court’s discretion including public interest considerations and standing of a public interest objector (MP).
• Court’s reasoning: On jurisdiction the judge accepted the convening judge’s prior findings and confirmed the Part 26A thresholds were met. The court selected the SAR as the most likely alternative to the Plan if it failed (directors would likely request Ofwat/Secretary of State to apply for special administration once liquidity exhausted) and held that, on the adopted valuation evidence, dissenting Class B and subordinated creditors would not be worse off in that Relevant Alternative. The judge preferred the Plan Company’s valuation approach and cross‑checked it against market prices for debt. The June Release Condition and related control terms were construed against the background of existing Finance Documents and the court found they did not, as a matter of construction or evidence, effect an unlawful bid‑rigging or give an unconstrained power to divert value; contractual extension mechanisms and requirement of subsequent creditor/ court approvals limited any asserted abuse. On discretionary fairness (horizontal comparison) the fact that the Plan was an interim measure, that Class A creditors would have no worse position in the alternative, and that RP2 was a realistic prospect, all weighed in favour of sanction. The competition law objection and objections to releases were rejected (releases tied to the Interim Platform Transaction only); standing of a public interest objector was recognised. The court ordered sanction of the Plan but invited submissions on consequential drafting matters and reserved consequential relief.

The judgment addresses interplay of Part 26A s.901G (relevant alternative, no‑worse‑off test), valuation evidence in contested cram‑down, the limits of creditor control provisions when read against existing security and intercreditor rights, and the exercise of discretion where public interest in continuity of essential services is engaged.

This was a first instance decision. The Court ordered that the Plan Company may convene and sanction the Plan under Part 26A CA 2006 (the Plan is sanctioned). The court held that the Part 26A thresholds were met, the relevant alternative most likely to occur if the Plan failed was special administration under the Water Industry Act 1991, and the no worse off test in s.901G(3) was satisfied for the dissenting classes on the preferred valuation evidence; discretionary objections (fairness, "horizontal" comparison, competition law challenge to the June Release Condition, and the form of releases) were rejected on construction and on the facts, and the judge exercised his discretion to sanction the interim Plan while permitting limited consequential applications to refine information‑rights and release wording.