plan for collapse of Thames Water

[Sythe79]

There's nothing illegal about the assets of a bankrupt water company basically being worthless, and the government deciding that is the cheapest way to re-nationalise instead of "saving" the investor by paying out full price. If anything, it seems like a smart capitalist move.

It doesn't surprise me that all the usual scare excuses come out when the taxpayer can be fleeced. If a pension fund is that over exposed to a water company, it's a bad pension fund that deserves it, capitalism baby.

Oh, it will knock confidence in Britain. Carillon for example hit British business confidence more than the water companies would, except amazingly that was pretty much allowed to fail and be picked apart for pennies on the pound (apart from the bits the taxpayer could be exploited for obviously like hospitals)

 

[GreatAuk]

There's nothing illegal about the assets of a bankrupt water company basically being worthless, and the government deciding that is the cheapest way to re-nationalise instead of "saving" the investor by paying out full price. If anything, it seems like a smart capitalist move.

It doesn't surprise me that all the usual scare excuses come out when the taxpayer can be fleeced. If a pension fund is that over exposed to a water company, it's a bad pension fund that deserves it, capitalism baby.

Oh, it will knock confidence in Britain. Carillon for example hit British business confidence more than the water companies would, except amazingly that was pretty much allowed to fail and be picked apart for pennies on the pound (apart from the bits the taxpayer could be exploited for obviously like hospitals)

That's just not true though - most of the assets will still be worth a significant amount. Expropriating those assets from the lenders (who will likely be the ones that end up owning them after a bankruptcy process, given that many loans are apparently secured against those assets) would be a pretty drastic precedent to set. This would be quite different to simply letting a company like Carillion fail.

The likely scenarios I've seen discussed are the investors losing almost all their money though - so there's no need to expropriate assets to avoid paying to 'save' investors.

 

[b0rn2sk8]

There's nothing illegal about the assets of a bankrupt water company basically being worthless, and the government deciding that is the cheapest way to re-nationalise instead of "saving" the investor by paying out full price. If anything, it seems like a smart capitalist move.

It doesn't surprise me that all the usual scare excuses come out when the taxpayer can be fleeced. If a pension fund is that over exposed to a water company, it's a bad pension fund that deserves it, capitalism baby.

Oh, it will knock confidence in Britain. Carillon for example hit British business confidence more than the water companies would, except amazingly that was pretty much allowed to fail and be picked apart for pennies on the pound (apart from the bits the taxpayer could be exploited for obviously like hospitals)

The point is the government can’t arbitrarily decide it is worth nothing and take it for free, that’s the point. The assets have a value.

When Carillion failed, the government didn’t and couldn’t just take all its assets. It’s a false equivalence.

If you can’t see why this would be a problem (and illegal), it’s really not worth having this conversation.

Edit: You are right that the assets might only be worth pennies on the pound in a fire sale but if it got to that point, the company would have ceased trading. The company is worth far more as a whole and being sold as a going concern.

Now think about that for a moment, if Themes Water ceased trading meaning it was no longer supplying water and sewage services to its customers (and no one else could because it’s a monopoly), what do you think the consequences of that would be and how much it would cost the taxpayer?

 

[StriderX]

Carillion didn't sit on a fundamental necessity of human survival though, who cares if it crumbled? The provision of water would be taken by force during wartime if need be and nobody would be wondering if it was illegal then.

 

[b0rn2sk8]

The provision of water would be taken by force during wartime if need be and nobody would be wondering if it was illegal then.

A) we are not in wartime.
B) that not how that mechanism works anyway.

We didn’t just take Russian assets by force at the start of the Ukraine war. We froze some assets under sanctions. We forced the sale of certain assets that needed to be operated as a going concern and the proceeds are now frozen under said sanctions. Those assets are held in escrow until the conflict is resolved. We can’t actually just take them and say give them to Ukraine or keep them for ourselves.

To reiterate, if you can’t see why the government seizing control of Themes Water and paying nothing for its assets would be a problem (and illegal), it’s really not worth having this conversation.

 

[Sythe79]

Edit: You are right that the assets might only be worth pennies on the pound in a fire sale but if it got to that point, the company would have ceased trading. The company is worth far more as a whole and being sold as a going concern.

It isn't a going concern tho, it's in massive debt, that it can't repay realistically ever, AND it needs massive investment it can't ever afford.

What it doesn't need is bailing out by the government taking it over and being on the hook for both. Like any business, it needs to die and a new nationally owned company formed to take it over.

 

[200sols]

It isn't a going concern tho, it's in massive debt, that it can't repay realistically ever, AND it needs massive investment it can't ever afford.

What it doesn't need is bailing out by the government taking it over and being on the hook for both. Like any business, it needs to die and a new nationally owned company formed to take it over.

Business get sold all the time, you hear those stories of x sold for £1? They are taking the assets and the debt which is what will happen here.

 

[b0rn2sk8]

It isn't a going concern tho, it's in massive debt, that it can't repay realistically ever, AND it needs massive investment it can't ever afford.

What it doesn't need is bailing out by the government taking it over and being on the hook for both. Like any business, it needs to die and a new nationally owned company formed to take it over.

The business isn’t involvement yet either, it’s got more assets than debt. It’s just sinking under its own debt burden.

What’s being proposed isn’t a bailout, it’s effectively a pre-administration deal (pre-pack) to sell the business as a going concern. The creditors get most of their debt cleared in return for the business being taken over by a new owner with all its assets.

When it does what do you think happens when a company falls into administration? They get sold, be that as a whole or broken up. You can’t just take the assets which others own for free.

I’m just flabbergasted at the lack of critical thinking here.

Business get sold all the time, you hear those stories of x sold for £1? They are taking the assets and the debt which is what will happen here.

This.

 

[Sythe79]

Business get sold all the time, you hear those stories of x sold for £1? They are taking the assets and the debt which is what will happen here.

Yes, usually by vulture capitalists whose main aim in to asset strip the carcass and leave nothing left, that sounds like a good idea for a water company.

what's more common is bad business goes bankrupt and the competition steps in to meet the need, even if that means picking up that companies assets to meet the need, the competition doesn't pay off the original companies' debt.

That's the fundamental flaw with private monopolies owning critical infrastructure

 

[b0rn2sk8]

what's more common is bad business goes bankrupt and the competition steps in to meet the need, even if that means picking up that companies assets to meet the need, the competition doesn't pay off the original companies' debt.

Erm… yes they do. What do you think happens when they buy the business assets from the liquidator. They money goes to paying the creditors of the business.

That's the fundamental flaw with private monopolies owning critical infrastructure

No, the fundamental flaw is selling profit making assets for a quick cash grab and then spiffing it up the wall on tax cuts.

 

[Sythe79]

Erm… yes they do. What do you think happens when they buy the business assets from the liquidator. They money goes to paying the creditors of the business.

Yes, at pennies on the pound the debt isn't wiped out, and even then only if anyone can use those assets, nobody is buying bankrupt McDonald's restaurant fixtures and fittings because they are worthless to anyone but McDonald's.

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

 

[Blackjack Davy]

Yes, at pennies on the pound the debt isn't wiped out, and even then only if anyone can use those assets, nobody is buying bankrupt McDonald's restaurant fixtures and fittings because they are worthless to anyone but McDonald's.

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

Nobody cares if they go bankrupt its not critical infrastructure. Water can't be allowed to go bankrupt and split up and sell the assets because obviously people need water supply. Like the banks its too big to fail. The US has made a similar argument for Intel ploughing money into it to prop it up it can't afford to let all chip manufacture fall into chinese state control potentially.

The real problem is selling off profitable state assets in the first place in retrospect it was a huge mistake.

 

[b0rn2sk8]

Yes, at pennies on the pound the debt isn't wiped out, and even then only if anyone can use those assets, nobody is buying bankrupt McDonald's restaurant fixtures and fittings because they are worthless to anyone but McDonald's.

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

You’re making a straw man arguments with false equivalences which aren’t relevant.

The value of the assets is entirely dependent on what they are and the nature of them and their future revenue generating potential.

A water company which has a literal monopoly with sixteen million customers has a significant revenue generating potential and has a huge value.

This is not some defunct high street retailer where you might buy it’s dead stock for pennies on the pound which they couldn’t sell in the closing down fire sale.

 

[Sythe79]

So which is it, a free market private revenue making business, that should live or die on its own terms, or a critical infrastructure that needs government assistance ? it can't be both.

 

[arknor]

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

No they wouldn't, it would be asset stripped to pay off any debtors and then the brand sold off

like all the shareholders would agree to a 1$ sale, unless they were giving pepsi shares as compensation

 

[b0rn2sk8]

So which is it, a free market private revenue making business, that should live or die on its own terms, or a critical infrastructure that needs government assistance ? it can't be both.

I assume you are not responding to me as I’ve not made any representations to that effect.

I’ve I’ve been trying to get though to is that the government can’t just renationalise the company for nothing. They’ll have to buy the assets back from the creditors.

 

[arknor]

I’ve I’ve been trying to get though to is that the government can’t just renationalise the company for nothing. They’ll have to buy the assets back from the creditors.

it cost 7.5bn to privatise all the water companies in 1989

This is how much money thames water paid out in dividends since then

Over their 11 years of control, Macquarie and its co-investors paid out £2.8bn to shareholders, which is two-fifths of the total £7bn in dividends that Thames Water has paid between 1990 and 2022.

literally one water company paid out almost as much dividends in 32 years as the whole sell off raised... I wonder how much thames water was privatised for, could have been as little as 500m-1billion right, what a massive earner that has been...

I wonder what the total combined dividends of all water companies in England and Wales has been since 1989

I bet its at least 50-100billion the treasury missed out on thanks to the tory privatisation of our services.

how is that good value for the tax payer? especially if we have to buy them back, then pick up the cost of under investment and decades of neglect

The guardian has some really good graphs about thames water

In charts: how privatisation drained Thames Water’s coffers

Decades of underinvestment and bumper dividends have left the firm debt-laden and under investigation

www.theguardian.com

I'll post the graphs to save people a click

Spoiler: Click me for images

Spoilered to keep the thread scroll friendly

 

[Sythe79]

I assume you are not responding to me as I’ve not made any representations to that effect.

I’ve I’ve been trying to get though to is that the government can’t just renationalise the company for nothing. They’ll have to buy the assets back from the creditors.

maybe not 'nothing', literally. the land might have some sort of value as commercial wasteland that you would never get planning permission on for anything else. what do you think a waste processing plant is actually worth if you can't operate it, compared to the book value ?

How many buyers are there, out there, if they need government permission to do anything ? only as many or few as the government allow.

 

[Sythe79]

No they wouldn't, it would be asset stripped to pay off any debtors and then the brand sold off

like all the shareholders would agree to a 1$ sale, unless they were giving pepsi shares as compensation

Who wouldn't, what ?

Yes, that's what I said it, a company in crippling debt would be asset stripped by its competitors and the shareholders would have no say in the matter.

 

[arknor]

Yes, that's what I said it, a company in crippling debt would be asset stripped by its competitors and the shareholders would have no say in the matter.

Pepsi wouldnt be asset stripping the company unless they did a hostile take over.

thats not how asset stripping works for a bankrupt company
Pepsi would do chapter 11 bankruptcy protection anyway and share holders would have a say

it's such a massive global companyt that they would likely be able to restructure the business