Thames Water Utilities Holdings Ltd, Re

In deciding whether to sanction a restructuring plan under Part 26A of the Companies Act 2006, the relevant alternative is the outcome most likely to occur if the plan is refused. The court need not find that the alternative is more likely than not to occur.

Where cross-class cram down is sought, the court must apply the statutory no-worse-off test and may also compare the treatment of creditor classes and the allocation of any restructuring surplus. An interim plan may properly be sanctioned where it offers a realistic opportunity to achieve a permanent restructuring, even if its financing is expensive. The court may sanction releases connected with the plan where they are necessary to implement it and are confined to conduct relating to that transaction.

Thames Water Utilities Holdings Ltd applied under Part 26A of the Companies Act 2006 for sanction of an interim restructuring plan extending debt maturities and providing new super senior funding. The plan had been approved by the requisite majorities in five creditor classes but opposed by the Class B creditors and a subordinated creditor.

The principal issues were whether the relevant alternative was special administration or an alternative restructuring plan; whether the dissenting creditors would be no worse off; whether the plan was unfair or contained a blot; whether its June Release Condition infringed competition law; whether the proposed releases were permissible; and whether the public interest and customer interests justified sanction.

1. Relevant alternative. The relevant alternative under section 901G(4) of the Companies Act 2006 is the outcome which the court considers most likely to occur, selected by comparison with the other realistic alternatives. It is not necessary to find that the alternative is more likely than not. The court should scrutinise evidence from the company and supporting creditors, particularly where a disastrous insolvency outcome is advanced.
2. The most likely alternative was a special administration of Thames Water Utilities Ltd, followed by insolvency processes for the other relevant group companies. The directors were reasonably entitled to conclude that there was insufficient time to implement the competing B Plan, that Class A creditors would support the Reinstated Plan instead, and that the Class B backstop commitments were not presently binding.
3. No worse off. On the accepted valuation evidence, the Class B creditors and the subordinated creditor would receive no less under the plan than in the special-administration alternative. The statutory conditions for cross-class cram down were therefore met.
4. Fairness. The horizontal comparison remains relevant where section 901G is engaged, but little weight should be given to opposition from creditors who are out of the money in the relevant alternative. The plan was an interim measure, generated no distributable restructuring surplus, and allocated participation in the new money pari passu. The control terms did not justify refusal of sanction.
5. June Release Condition and competition law. Properly construed, the condition did not give Class A creditors an express right to control the equity raise or the later restructuring. The contractual obligation to consider an extension request in good faith and not unreasonably withhold or delay consent limited its operation. The condition was neither a restriction by object nor a restriction by effect under section 2(1) of the Competition Act 1998.
6. Releases and public interest. The releases were tied to the negotiation, preparation, sanction and implementation of the interim transaction and did not extend to the subsequent restructuring. They were not a blot. Customers and the wider public were affected and had standing through Mr Maynard MP. Nevertheless, the realistic prospect of a permanent restructuring, the statutory policy favouring rescue, and Ofwat’s position justified sanction.
7. The plan was sanctioned. Consequential matters, including possible amendments to information rights and releases, were reserved.

First-instance decision. The judgment records the earlier convening decision by Trower J in [2024] EWHC 3310 (Ch) and his refusal of permission to adduce expert economic evidence in [2025] EWHC 84 (Ch), both arising in the same proceedings.