Macquarie asked Ares to take the southern water debt

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Macquarie controlled by Water Southern asked Ares Management and other lenders to reduce about 370 million pounds of debt, in an effort to allow the new net heritage to flow directly to the very improper operating company.

The talks place one of the largest private capital companies in America at the center of financing struggles in another utility of British water-laden debt, just as Thames Water has obtained an emergency loan from a group of creditors including American funds such as Elliott Management and Silver Point.

The south, which provides water and water services to 4.7 million clients in southeastern England, asked the headlines of bonds such as the Ares leadership and the Australian Capital Australian Infrastructure Investor to write all their debt, according to the people who know the matter.

Investors have debt to the southern holding company level, which has approximately 370 million pounds of good external, according to the company’s most recent registrations. The debt is at the top of the capital structure and far from the useful assets of the utility, which makes it risky for investors.

Macquarie took a majority participation in the south of 2021. The Australian investor and the lenders are negotiating a partial letter, but they still agree in terms. Macquarie’s demands are still too strong for lenders, depending on the people who know the discussions.

The village added a request for a complete writing.

Ares, who oversees $ 550 million in assets, became a southern lender when he acquired the AMP Capital Infrastructure Debt Business in 2022. AMP became a southern lender in 2018.

South Water’s “Midco” lenders, including Caisse de Dépôt et Placement du Québec, one of the largest pension funds in Canada, could also face reductions in the future. These bond headlines are between the debt of the operational company and the bonds of the holding.

Macquarie, Ares, Southern Water and CDPQ refused to comment. Westbourne Capital did not respond to a comment request.

South finances are less full than those of Thames Water, which is the largest water utility in the United Kingdom and serves households with 16 million people. But the utility is very debt and has been under pressure in the debt markets in the midst of the concern about its credit rating and the potential for breach of debt accommodation.

Next to the proposed hair cut, the southern owner, Macquarie Asset Management, injects 900 million pounds of new capital in the company.

The aim of a letter is to allow Macquarie to inject all new money to the southern operational company, instead of using part of it to serve the company’s debt, according to the people who know the subject.

Within the southern complex structure, the regulated operational company, a “ringfed” group that is supposed to protect from stress in the upstairs companies, has a capital ratio with a capital of approximately 70 percent.

After being reduced to the “rubbish” by the Moody’s Qualification Agency in November, Southern has been about non -payment and is fighting with the increase in loans costs in its debts stack of more than £ 6 million.

Variable income injection has cooled some of the market’s worries in the south, and the prices of their bonds are recovered. Its status of “negative clock” was eliminated by the Fitch Qualification Agency.

At the end of last year, the utility took £ 300 million by selling good senior to their operational company to a group of coverage funds for an annual interest rate of 7.75 percent. In an indication of its difficulties in increasing capital, the south used a private process mainly used to coverage funds for the sale of bonds.

The bond interest rates issued by the south are almost three times higher than the cost of dewat debt for the sector.