Thames Water has agreed a deal with its creditors to push back more than £12bn of debts until March 2028, giving the troubled supplier more time to agree a long-term rescue.

The UK's biggest water company, which is struggling under debts of more than £20bn, announced on Monday that creditors representing more than £12bn of secured debt had signed a transaction support agreement. Under the deal, repayments on debts that were due in 2027 would be extended by a year, to March 2028.

Thames Water said: "The signing of the transaction support agreement is an important milestone in Thames Water's progress towards a recapitalisation."

What the deal does

The agreement covers an interim step known as the Stable Platform Period extension. It is intended to give the company more time to agree the terms of a future recapitalisation while it continues its AMP8 capital investment programme, which is focused on improvements for customers and the environment.

Interest payments on super senior, Class A and Class B debt would continue to be paid and would not be deferred. Payments under hedging agreements would also continue.

The deal would be put in place through two parallel restructuring plans under Part 26A of the Companies Act 2006. A court convening hearing is set for 27 November, followed by creditor meetings on 17 December and a sanction hearing on 13 January 2027. The transaction is expected to take effect in the week beginning 1 February, subject to the court's judgment.

Creditors are being encouraged to join the agreement by 11 December to qualify for a non-cash consent fee, initially 0.50% and falling to 0.10% if enough support is secured. Thames Water says the fees and costs of the transaction will be funded solely by creditors and will not be met using customer funds.

Rescue talks continue

The breathing space comes as a consortium of more than 100 creditors, who together hold about £17bn of Thames Water's debt, remains in talks with regulator Ofwat and the government over a £10bn rescue deal.

The plan from the consortium, called London & Valley Water, is widely seen as the final realistic option to avoid Thames Water being placed into a special administration regime. An earlier rescue deal with US private equity firm KKR collapsed in May last year.

London & Valley Water was sent back to the drawing board in June after the then environment secretary, Emma Reynolds, warned that its £10bn plan did not go far enough to protect customers or the environment. It is now working on new proposals, which are expected to be put to Ofwat before the end of the year.

Thames Water confirmed on Monday that discussions "remain ongoing" and that its board, Ofwat, other regulators and investment committees had made no decision to accept and take forward any proposal from the consortium.

Cash until autumn 2027

The debt extension follows an announcement weeks ago that Thames Water's controlling lenders had agreed a further £2.4bn of funding to stop the company running out of cash at the end of the year. That funding comes on top of an existing £3bn emergency loan and is enough to keep the company running until autumn 2027.

Together, the new funding and the debt extension give Thames Water the runway it needs to strike a rescue deal, but the long-term recapitalisation of the company remains unresolved.