Pallas tapped as Thames Water creditors brace for nationalisation fight

Litigation boutique Pallas Partners has been drafted into one of the UK's highest-profile restructuring battles after being instructed by a consortium of Thames Water creditors to prepare for a potential legal challenge over the utility's future ownership.

The London & Valley Water (L&VW) consortium controls approximately £17 billion of Thames Water's roughly £21 billion debt pile and includes Apollo, Elliott Management, Farallon Capital and Silver Point Capital fund managers. The consortium is also being advised on its restructuring proposal by US firm Akin.

New prime minister Andy Burnham has previously called for greater “public control” of utilities indicating he could favour temporary public ownership rather than approving the creditors' private rescue plan.

Pallas’ appointment was first reported by Sky News.

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L&VW has proposed a £10 billion recapitalisation involving fresh investment, debt restructuring and substantial write-downs to keep the company in private ownership. The consortium has reportedly sought talks with the government in the hope of avoiding state intervention.

While no proceedings have been issued, a person close to the consortium told Sky News that litigation remained a "last resort".

Fees to climb

Any court battle would add to an already sizeable legal bill generated by Thames Water's prolonged financial crisis. The company's emergency £3 billion bailout had already produced at least £68 million in legal and advisory fees, with firms including Linklaters, Akin, A&O Shearman, Freshfields and Quinn Emanuel advising the various stakeholders.

Those costs were incurred during the High Court proceedings that approved Thames Water's emergency financing package, with the restructuring involving multiple creditor groups, regulators, government bodies and rival bidders.

A dispute over nationalisation would mark the latest chapter in what has become one of the UK's most heavily lawyered corporate restructurings.

Pallas mandate

The instruction is another high-profile restructuring-related mandate for Pallas, the litigation boutique founded by Natasha Harrison, a former Boies Schiller partner, in 2022.

The firm specialises in high-value commercial disputes, arbitration and investigations and has built a reputation for taking on heavyweight financial and corporate litigation, regularly competing with Magic Circle and leading US firms.

Among its most notable mandates is acting for Credit Suisse bondholders in ongoing Swiss proceedings arising from the controversial write-down of their bonds during the bank’s government-backed 2023 rescue and takeover by UBS.