London & Valley Water, a consortium of institutional investors holding £17bn of Thames Water’s debt, has stated it is open to government involvement in a rescue deal but opposes full public ownership. The creditors are willing to accept a proposal that could see the British state become a shareholder, potentially through a golden share or an equity stake held by the National Wealth Fund.

The consortium, which consists of 100 institutional investors including Apollo Global Management, Elliott Management, Farallon Capital Management, and Silver Point Capital, holds the majority of the utility’s £21bn debt load. Members have engaged Pallas Partners to work alongside Akin Gump on legal preparations as they navigate the financial restructuring of the company, which serves 16 million customers in London and the Thames valley.

Mike McTighe, a corporate troubleshooter leading the governance overhaul and building a new board for the utility, outlined the group's position in a series of statements. McTighe, who is the chairman of Openreach, BT Group’s infrastructure arm and previously chaired the Daily Telegraph’s publisher, is likely to take over as Water’s chair if the consortium’s £10bn rescue deal receives government approval.

"We are keen to meet new ministers as soon as possible to discuss how we can work together in the best interests of customers, including by enhancing public control of the company’s operations," McTighe said. He added that the group is prepared to collaborate with political leaders to stabilize the sector. "We will work with Andy Burnham, his government and local authority leaders to rebuild confidence in Thames Water and the wider sector," he said.

The consortium has proposed a solvent restructuring plan that aims to restore the company's financial health without resorting to a taxpayer-funded bailout. "We remain ready and willing to recapitalise Thames Water, return it to investment grade, and begin the long process of turning it around," McTighe said. He emphasized the need for immediate dialogue with officials. "We urgently need government engagement to begin that process," he said.

Creditors have offered to inject at least £20bn into Water up to 2030. This commitment includes around £10bn in capital spending, which would be funded by £6.5bn in debt and about £3.4bn in equity. No formal offer of a government stake has been made by the creditors yet, but sources indicated the government could take equity in the company, potentially through a vehicle such as the Wealth Fund.

A source close to the situation indicated that government ownership could potentially take the form of a golden share that gives ministers a veto over key decisions, or a conventional equity stake. This approach differs from previous discussions, as a government equity stake was not an option discussed under Sir Keir Starmer’s administration. The consortium is also exploring other avenues to manage the crisis.

A person close to the consortium said creditors are assessing all potential routes the situation regarding Water may take. "They want, and need, to be ready," the person said. The source clarified that the current legal preparations are not an aggressive move against the state.

"There is no legal action being taken at this point," the person said. "This is purely a precautionary measure."

The push for a private-sector solution comes as political figures consider alternative interventions. Andy Burnham is reported to be planning to transfer Water into a special administration regime after he takes over as prime minister. A special administration regime is a form of temporary public ownership. Burnham said last month that there should be greater public control of Water, and he that greater public control could mean nationalisation.

Water creditors estimate the cost of a special administration regime at £2bn. Regulatory impact assessments estimate that these costs would be recovered through future customer bill increases, with £1.2bn allocated for debt write-downs and £800m for administrative costs. A person close to the consortium argued that a state-led process would delay resolution.

"The consortium is trying to pursue a solvent restructuring," the person said. This would avoid a taxpayer-funded administration process and help creditors recover as much as possible.

The source noted that competing bids could further complicate the timeline. "It can bid alongside any others, but that prolongs everything," the person said. Emma Reynolds, the environment secretary, wrote to the regulator Ofwat last month voicing concerns about the terms of the deal. The utility’s financial struggles follow a failed attempt to sell the company to the US investment group KKR last year.

Water provides essential services to 16 million customers, and its financial stability has broad implications for households and businesses in London and the Thames valley. The consortium’s proposal offers a path to recapitalization that avoids direct nationalization, which one insider warned could result in litigation that dragged on for years. The involvement of major institutional investors such as Apollo Global Management and Elliott Management reflects the scale of private capital seeking to resolve the utility’s debt burden.

The potential for government involvement through a golden share or the Wealth Fund represents a shift in strategy compared to previous administrations. This mechanism would allow ministers to exert influence over key decisions without assuming full ownership liabilities. The outcome of these negotiations will determine whether the company undergoes a solvent restructuring or enters a special administration regime, a process that creditors estimate could cost taxpayers £2bn.