Thames Water - Case Update

The High Court has dismissed an application brought by a junior creditor of Thames Water to introduce expert evidence from a competition economist concerning a term in the restructuring plan (the “Plan”) proposed by Thames Water.

Kington SARL is a member of an ad hoc group of junior creditors (the "Class B AHG") who have indicated their intention to vote against and oppose the sanctioning of the Plan. The Plan is supported by an ad hoc group of senior creditors (the "Class A AHG"), and is designed to facilitate the injection of new super senior funding to be provided in two separate tranches pending a longer-term solution to the Group's financial difficulties. That longer-term solution has been described as a more holistic recapitalisation of the business itself to be implemented by a further restructuring plan in due course. The first tranche of new super senior funding is £1.5 billion on the Plan becoming effective and the second is a further £1.5 billion if two conditions are satisfied.

The second of these conditions — the June Release Condition (“JRC”) — was the contested term. The effect of the JRC is that no additional super senior funding will be available to the Group after 30 June 2025 unless the JRC has been and remains satisfied. According to the Plan documentation, the JRC “will be satisfied if, by 30 June 2025, a lock-up agreement in respect of a recapitalisation solution, whether by way of an equity raise or a creditor led solution, has been entered into by at least (i) 66 2/3% of the Super Senior Funding; and (ii) 66 2/3% of the aggregate Class A Debt”.

Kingston argued that the JRC infringed UK competition law by allowing the senior creditors excessive control over the timing and nature of the company's recapitalization process. According to Kingston, this control went beyond the rights that any Class A creditor would otherwise enjoy as a result of their position as a senior, secured creditor of the Group. Kingston sought to introduce expert evidence in the form of a draft report from a partner at RBB Economics with significant experience in the application of competition economics to private litigation, damages estimation and regulatory disputes. He also has experience spanning mergers, abuse of dominance, anti-competitive agreements and market investigations. It was not suggested by Thames Water or the Class A AHG that the proposed expert did not have sufficient expertise.

Nevertheless, the Court refused to admit Kingston’s proposed expert report, finding that the draft report was “either commentary on the law looked at from an economist's perspective or was expressed in such tentative, caveated and incomplete terms that it is not reasonably required to resolve the proceedings.” The Court further concluded that the report would be an “inappropriate distraction” if it were allowed to be admitted. In addition, the Court found that the tight timetable for the sanction hearing rendered it impractical to allow the introduction of new expert evidence, as doing so would unfairly prejudice Thames Water and disrupt the proceedings.

Ultimately, the Court held that the proposed expert evidence was neither necessary nor proportionate for resolving the competition law issues and dismissed Kingston’s application.

The decision can be accessed here.

Professionals involved:

• Tom Smith KC, Charlotte Cooke and Andrew Shaw of South Square and Philip Moser KC of Monckton Chambers (instructed by Linklaters) for Thames Water

• Adam Al-Attar KC and Edoardo Lupi of South Square (instructed by Akin Gump) for the Class A AHG

• Tony Singla KC and Charlotte Thomas of Brick Court Chambers and Matthew Abraham of South Square (instructed by Quinn Emanuel Urquhart & Sullivan) for Kingston