Bond issue documentation shows UK utility under pressure over high financing costs
Southern Water would default on its debt if Moody’s and S&P further downgraded the utility’s credit rating, just as it borrowed £300mn from hedge funds. The heavily indebted group, which is controlled by Australian infrastructure investor Macquarie, is rated one notch above “junk” territory by Moody’s and S&P. Both agencies have warned they could further downgrade Southern Water’s credit ratings, which would take the company below investment-grade.
In another indication of the strain on the utility’s access to capital, Southern had to raise the bond in a private process primarily aimed at hedge funds, according to people familiar with the sale. Investors in the £300mn bond include US hedge funds King Street Capital Management and Sculptor Capital Management, the people added. King Street and Sculptor declined to comment.
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