Thames Water - comment

Andy Burnham's government may use Talk Talk as a test balloon before settling on a strategy for Thames Water. As the utility goes from request to request in a monthly rhythm, management has outlined another £2.4bn cash need for next year. This is not new per se, but was supposed to be provided against a deal. The government is probably betting that stalling the situation will soften creditors, and we are surprised to see the Class A bonds still in the 50s. The situation may layer them with nearly double the super sr. fresh cash before a deal is struck. That cannot be good. As we've seen with the accordion facility, we expect fresh cash providers to siphon more economics from those who don't. Effectively, creditor infighting, which is exactly what the other side will want to see more of.