The Thames Water creditor on creditor violence playbook has taken some real nasty tactics this week to include a non-combatant as the Court of Appeal hearing nears. It appears one group of creditors set course on a hit list agenda against a liberal-dem MP, Charlie Maynard, who gathered together a few good pro bono advisors and lawyers to make sure the UK High Court heard from the “public interest” including the 16 million customers before making a decision to allow Thames to take on more expensive debt which would likely increase water bills.
What was monumental (and a first of its kind) is that Mr. Maynard was not only heard (which the Thames barrister did not initially object), but he was giving “standing” which enabled the judge to consider his barrister’s arguments in his decision to sanction the Company’s Restructuring Plan. This became a source of ongoing contention throughout February’s Sanction Hearing. In the “Public Interest” section of the Judgement, Justice Leech agreed with many of Mr. Maynard’s arguments, especially the sheer cost of the new financing and advisory fees. However, he did not believe they were strong enough to prevent him from sanctioning the plan. Nevertheless, Mr. Maynard’s presence was obviously welcomed by the Court and Justice Leech even thanked him and his team for their clear and cogent evidence.
I began reporting on the nearly insolvent UK water company this fall at 9fin and witnessed first hand the aggressive behind the scenes information flow that both the Company, the Class A investors (Elliot/Silverpoint) and the minority Class B investors were spitting out to journalists. Trying to come up with any kind of unbiased analysis of the multi-billion high-interest bridge loan being offered and the alternative financing deals was hard. A few of us on my 9fin UK distressed team would actually fact check the numerous PR messages we’d get before using them as quotes in a story and I personally started to see a troublesome pattern by one firm who usually doesn’t play in the financial debt restructuring sandbox. The London-based firm is called Hanbury Strategy and was hired by the Class A investors to be their influencer PR firm.
Before the UK court administered process began in December, one of the largest US-based funds in the Class As, demanded a call with me and one of the 9fin distressed team editors to sell us on how the Class B plan was ‘just noise’ and tried to ‘educate’ two experienced American reporters on the ‘awful effects’ of a UK government take over scheme called a Special Administration or SAR. (Independent distressed analyst Glenn Zahn wrote an excellent analysis on the backstory of this deal here.) My take away from that call was 1) some of the Class A investors were going to use the UK political process to get a deal done that benefited their interest the most 2) they were unafraid that the new UK labor government would really put this public utility into a SAR, which would lead to substantial haircuts of their debt.
A few months down the road, the Thames’ Plan was sanctioned by Justice Leech (the Adler judge who had his decision overturned) via the UK Restructuring Plan (UK RP), a non-insolvency and court-administrated process. However, it now faces an appeal hearing next week, which, if successful, would likely result in a SAR given an insolvency event on 24 March. Nearly everyone I speak to, except hopeful environmentalists, think Mr. Maynard’s appeal doesn’t have much of a chance. So when I started to get calls over the weekend that a Tory MP was going to file a complaint against Mr. Maynard for some kind of conflict of interest he might have in an attempt to torpedo his appeal, I couldn’t figure out why the Class A group creditors would act so desperate behind the scenes.
(While the Judge did not refute or discredit MP Charlie Maynard’s points, he said they were not strong enough. However, opponents of the sanctioned plan hope they could be strong enough by more senior judges in the Court Of Appeal.)
Hanbury Strategy is known as a political PR animal in the UK. It’s a Tory aligned lobbying firm-according to well every UK journalist I have ever met. In my opinion the political pr staff inside of Hanbury worked to get out news that MP Maynard owns a 15% investment in BDA Partners – and used blogger Gideo Fawkes to inaccurately say the company specializes in water company M&A. This hit piece thinly tries to say MP Maynard had lobbied on behalf of something that benefits his personal financial interest. I think it’s likely, according to multiple people familiar with the situation, that Hanbury worked behind the scenes to encourage Tory MP Saqib Bhatti to file a complaint with the House of Commons standards committee. Then this group of people likely got the Tory focused blogger Guido Fawkes (who is known to run political smear campaigns in the UK) to write about it.
Anyone could just go to the registered interest free UK database for MP’s and see that MP Maynard has disclosed a shareholder position of over 15% in BDA Partners – a Asian based minor investment bank that I am told has not done a water utility company deal in its nearly 30 years of business.
When I reached a member of the Hanbury team today they obviously had a different view of their role in the situation and were not excited that I was going to opine on how the pr-news making sausage is made.
Trying to ice-out an MP who appears to be working in the public interest for his constituents to have clean affordable water just seems beyond childish and vindictive.
None of the MPs responded directly for comment.
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