A&O taps in to Anglian Water rejig

Allen & Overy (A&O) is advising Barclays Bank, Salomon Brothers International and bankers Trustee Company on the restructuring of Anglian Water.
The group is being split into two divisions – Anglian Water Group (AWG) and Anglian Water Services (AWS) – in order to consolidate its existing debts, raise new debt and return cash to its shareholders. The restructuring is set to finish by the third quarter of this year.
Under the new structure, AWS will become a ringfenced business that will hold the company’s £1.8bn of existing debt. It will also raise £1.6bn of new debt.
AWG will be responsible for the operations of the company and the infrastructure management businesses of the group.
A&O partner Anne Baldock, who is leading on the deal, said: “We’re working with the banks to consolidate the debt. The idea is for all the debt to be lent at the same level and under the same terms so that the company acts as a single group on how to deal with its debt. At the moment, there are a large number of bond issues and unsecured bilateral facilities all operating at different levels. By consolidating the debt, it can use its leverage to reduce it.”
Ringfencing AWG means that it will avoid being tainted by what other parts of the group are doing.
The restructuring will draft a common terms agreement so that all lenders will have to lend under specified terms that fall within the intercreditor agreement. This means that the deal will put together financing for the next 30 years.
Linklaters and Herbert Smith are advising the company. Herbert Smith has a long-term relationship with AWS and is advising on the return of cash to shareholders. The restructured company will need a new licence with water regulator Ofwat, which Herbert Smith is also advising on.
AWG is issuing bonds which are being ‘wrapped’ by insurance company MBIA. Clifford Chance is advising MBIA.
Herbert Smith partner Ben Ward, who is working alongside partner and water specialist Trevor Turtle on the transaction, explained: “This was a big transaction with a lot of lawyers. We had a team of about seven lawyers. Linklaters and Allen & Overy had a core team of about 10. Clifford Chance used a small team but didn’t have a small role. Their role is important, because if it all goes wrong and AWS defaults on its payments, MBIA will have to pay up.”
Partners Julian Davies and John Goodwin are leading the Linklaters team. Clifford Chance’s team is being led by Dan Reynell, while A&O international capital markets partner Andrew Wilson is advising the banks on the structure of the loans alongside Baldock.