Southern Water secures £1.2bn fresh equity from Macquarie

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.Macquarie has agreed to inject as much as £1.2bn of contemporary fairness into Southern Water as a part of a deal that can consequence within the debt owed to its holding firm lenders being lower by greater than half. As a part of the deal Macquarie, Southern’s proprietor, has dedicated to speculate £655mn of fairness initially into the utility — which gives water and sewerage companies to 4.7mn clients within the south-east of England. The Australian investor intends to offer a minimal of £245mn in extra fairness by December, a sum that would rise to as a lot as £545mn.Whereas Southern’s funds are much less fraught than these of Thames Water, the UK’s largest water utility, it has nonetheless come below stress in debt markets over considerations it may breach its covenants.This yr Southern requested bondholders together with Ares Administration and Australian infrastructure investor Westbourne Capital to jot down off all of their roughly £370mn of debt, the Monetary Occasions beforehand reported.The writedowns had been seen as a option to enable new fairness to circulation immediately into the utility’s heavily-indebted working firm, somewhat than getting used to service debt additional up the capital construction.Ares and Westhouse maintain debt at Southern’s high holding firm stage, distant from the utility’s working belongings, making it dangerous for buyers to personal. The writedowns will cut back the quantity of debt throughout Southern’s holding firms from £865mn to £415mn. Bondholders have been given concessions in trade for accepting writedowns, in keeping with an individual accustomed to the matter.The maturities of the remaining debt services are being prolonged to not less than September 2030.In February, Macquarie dedicated to injecting £900mn of contemporary fairness into the corporate, a rise on the £650mn it had promised beforehand.