TIDM31HI
RNS Number : 3151Q
Southern Water Serv (Finance) Ltd
26 October 2021
SOUTHERN WATER SERVICES (FINANCE) LIMITED ANNOUNCES A CONSENT
SOLICITATION
26 October 2021
Overview
Southern Water Services (Finance) Limited (the "Issuer") today
announces a consent solicitation in respect of the following series
of bonds (the "Bonds"):
(a) Sub-Class A1 GBP350,000,000 6.192 per cent. Wrapped Bonds
due 2029 (XS0172989252) (guaranteed by Southern Water Services
Limited, SWS Holdings Limited and SWS Group Holdings Limited);
(b) Sub-Class A2a GBP150,000,000 Index-Linked Wrapped Bonds due
2034 (XS0173036194) (guaranteed by Southern Water Services Limited,
SWS Holdings Limited and SWS Group Holdings Limited);
(c) Sub-Class A2b GBP35,000,000 Limited Indexed Wrapped Bonds
due 2034 (XS0173059998) (guaranteed by Southern Water Services
Limited, SWS Holdings Limited and SWS Group Holdings Limited);
(d) Sub-Class A4 GBP350,000,000 6.640 per cent. Unwrapped Bonds
due 2026 (XS0172992637) (guaranteed by Southern Water Services
Limited, SWS Holdings Limited and SWS Group Holdings Limited);
(e) Sub-Class A5 GBP150,000,000 Index-Linked Unwrapped Bonds due
2023 (XS0173041517) (guaranteed by Southern Water Services Limited,
SWS Holdings Limited and SWS Group Holdings Limited);
(f) Sub-Class A8 GBP150,000,000 5.00 per cent. Wrapped Bonds due
31 March 2041 (XS0220566383) (guaranteed by Southern Water Services
Limited, SWS Holdings Limited and SWS Group Holdings Limited);
(g) GBP200,000,000 Sub-Class A9 4.50 per cent. Wrapped Bonds due
March 2052 (XS0271386244) (guaranteed by Southern Water Services
Limited, SWS Holdings Limited and SWS Group Holdings Limited);
and
(h) GBP300,000,000 Sub-Class A10 5.125 per cent. Wrapped Bonds
due September 2056 (XS0308998144) (guaranteed by Southern Water
Services Limited, SWS Holdings Limited and SWS Group Holdings
Limited).
For the avoidance of doubt, the Issuer has not included the
GBP375,000,000 Sub-Class A12 2.375 per cent. Fixed Rate Sustainable
Bonds due 2028 (XS2180916525), the GBP450,000,000 Sub-Class A13
3.000 per cent. Fixed Rate Sustainable Bonds due 2037
(XS2180916871) and the GBP300,000,000 Sub-Class A14 1.625 per cent.
Fixed Rate Sustainable Bonds due 2027 (XS2325617939) (together, the
"Substituted Class A Bonds") in the Consent Solicitation as the
substitution of the New UK Issuer as the issuer of the Substituted
Class A Bonds will be automatically effected in accordance with
Condition 3(d) of the terms and conditions of the Substituted Class
A Bonds.
Capitalised terms used in this announcement and not defined
herein shall have the meanings ascribed to them in the Solicitation
Memorandum dated 26 October 2021 (the "Solicitation
Memorandum").
Meeting of Bondholders
A single meeting of Bondholders has been convened in respect of
all series of Bonds as listed above to consider, and if thought
fit, pass the Extraordinary Resolution to approve the Proposals
(being the STID Proposal and the Substitution Proposal) and their
implementation, and such Meeting shall take place via
teleconference at 11.00 a.m. (London time) on 23 November 2021.
Bondholders who do not wish to attend (via teleconference) the
Meeting but who wish to vote must take action prior to 4.00 p.m.
(London time) on 18 November 2021 (the "Expiration Time"), subject
to amendment, termination or withdrawal by the Issuer and any
earlier deadlines set by the Clearing Systems or any intermediary
through which such Bondholders hold their Bonds.
In light of ongoing developments in relation to the COVID-19
pandemic, it may be impossible or inadvisable to hold the Meeting
at a physical location. Therefore, in accordance with the
provisions of the Bond Trust Deeds further regulations regarding
the holding of the Meeting will be prescribed providing that the
Meeting (and any adjourned Meeting) will be held via
teleconference. Accordingly, the Meeting (and any adjourned
Meeting) will not be convened at a physical location. In such
circumstances, those Bondholders who have indicated that they wish
to attend the Meeting will be provided with further details about
attending the Meeting (and any adjourned Meeting) via
teleconference.
Background
The Issuer is incorporated in the Cayman Islands.
The Issuer is managed and controlled in the UK and is solely UK
tax resident, having submitted tax returns to HM Revenue &
Customs since its establishment. Notwithstanding this, for a number
of years there has been negative press coverage and speculation on
UK water companies using financial subsidiaries incorporated in the
Cayman Islands, which has led to the inaccurate perception that the
use of Cayman Islands-incorporated financing subsidiaries is for
tax avoidance purposes. Furthermore, UK water and sewerage
companies are being subjected to increasing pressure and scrutiny
from the economic regulator Ofwat. [1]
Southern Water Services Limited ("SWS") is of the view that
maintaining a financing structure which includes the Issuer could
be prejudicial to its relations with, and future price
determinations by, Ofwat. In addition, it could impact its ability
to sustain the trust and confidence of its customers as it seeks to
improve the transparency of its business. Consequently, the
interests of the Secured Creditors may be adversely affected.
On 13 April 2018, SWS announced its intention to remove the
Issuer from its corporate structure and the Proposals as more fully
described in the Solicitation Memorandum set out the necessary
steps to achieve this objective.
The Proposals
As more fully set out in the STID Proposal, it is envisaged that
two new wholly owned direct subsidiaries of SWS will be
incorporated in the UK, one as a public limited company (the "New
UK Issuer") and one as a private limited company (the "New UK
DebtCo") and that the debt issued by the Issuer will have its
issuer and/or principal debtor substituted for the New UK Issuer
(in respect of the Bonds and certain other existing debt) and the
New UK DebtCo (in respect of certain other existing debt).
Following approval and implementation of the substitution (and
the other steps more fully set out in the STID Proposal (appended
at Schedule 3 to the Solicitation Memorandum)), the Issuer would be
disposed of from the SWS Financing Group and subsequently dissolved
on a solvent basis.
The Bonds, private placement notes and their related liquidity
facilities will be transferred to the New UK Issuer. The term
facilities agreement of the Issuer with each of Artesian Finance
plc and Artesian Finance II plc will be transferred to the New UK
DebtCo in order to support the securitisation tax company status of
the New UK Issuer.
Furthermore, Secured Creditors should note that the Substitution
Proposal outlined in the Solicitation Memorandum is subject to the
Extraordinary Resolution. If the Extraordinary Resolution is not
passed, the Issuer will not be substituted and the Bondholders will
remain with the Issuer as the current issuer of their debt as it
currently stands and will not receive the Instruction Fee.
Bondholders should also note that, to the extent the Substitution
Proposal goes ahead, the Bonds will continue to be listed on the
main market of the London Stock Exchange following the
implementation of the Substitution Proposal. The STID Proposal is
not, however, conditional upon the Extraordinary Resolution, with
the effect that if the Extraordinary Resolution does not pass the
STID Proposal may still be approved and certain aspects of it may
be implemented.
For detailed information on the Proposals, including the steps
envisaged to achieve the removal of the Issuer from the SWS
Financing Group, see the form of the STID Proposal (appended at
Schedule 3 to the Solicitation Memorandum).
Amendment Conditions
Implementation of the transactions set out in the STID Proposal
is conditional on:
a) Rating Agency confirmations from any two of the Rating
Agencies confirming that the Transaction (as defined in the form of
the STID Proposal appended at Schedule 3 to the Solicitation
Memorandum) would not cause a downgrade or removal of the then
current credit rating of the Bonds (or where a Rating Agency is not
willing to provide its confirmation due to its prevailing policy
regarding the issue of rating affirmations, a certificate in
writing from SWS addressed to the Security Trustee certifying that,
in its opinion (and where the relevant Rating Agency was prepared
to consult with SWS, this opinion is based on consultation with
such Rating Agency) the Transaction would not cause a downgrade or
removal of the then current credit rating of the Bonds);
b) the approval of the STID Proposal and the announcement by the
Security Trustee of such approval;
c) the execution of documentation in respect of the accession of
each of the New UK Issuer and the New UK DebtCo to certain
transaction documents;
d) the delivery to the Security Trustee of certain legal
opinions of Linklaters LLP as to matters of capacity and
enforceability of certain transaction documents;
e) certifications of Southern Water Services Limited as to
certain matters set out more fully in the STID Proposal; and
f) the other conditions set out in paragraph 5 (Comfort Package)
of the form of the STID Proposal (appended at Schedule 3 to the
Solicitation Memorandum),
(the " Amendment Conditions ").
The Issuer will announce satisfaction of the Amendment
Conditions as soon as practicable thereafter.
The approval threshold in respect of the STID Proposal is a
simple majority of votes cast during the Voting Period or, if
sooner, approval by more than 50 per cent. of the principal amount
outstanding of Qualifying Class A Debt, in each case provided that
any Secured Creditor whose Entrenched Rights are affected has also
approved the STID Proposal.
It is intended that the transaction will be implemented within
six months of the STID Voting Date, however the timing for the
implementation of the transaction shall be at SWS's sole and
absolute discretion.
Instruction Fees
Subject to the conditions set out in the Solicitation
Memorandum, including the approval of the Extraordinary Resolution,
the approval of the STID Proposal and the announcement by the
Security Trustee of such approval, the Issuer will pay to a holder
of the Bonds who has delivered a valid Electronic Voting
Instruction in respect of the Extraordinary Resolution which has
been received by the Tabulation Agent at or prior to the
Instruction Fee Deadline, which has not been validly withdrawn
following the Instruction Fee Deadline and/or at or prior to the
Expiration Time and which remains in full force and effect until
the conclusion of the Meeting, the instruction fee equal to 0.025
per cent. of the principal amount outstanding of such Bonds the
subject of the relevant Electronic Voting Instruction (the
"Instruction Fee"). The Instruction Fee shall be paid on the
relevant Payment Date via the relevant Clearing System for onward
payment to the cash account of an eligible holder of the Bonds in
such Clearing System. The payment of any such amounts to the
relevant Clearing System will discharge the obligations of the
Issuer in respect of the Instruction Fee to all such relevant
Bondholder(s).
Holders of Bonds will not be eligible to receive the Instruction
Fee if (i) they do not submit a valid Electronic Voting Instruction
which has been received by the Tabulation Agent at or prior to the
Instruction Fee Deadline, (ii) if they attend (via teleconference)
the Meeting and vote in person, (iii) they revoke their
instructions after the Instruction Fee Deadline and/or on or prior
to the Expiration Time or (iv) they unblock their Bonds prior to
the Payment Date.
It is a condition to the Issuer's obligation to pay or procure
the payment of the Instruction Fee to relevant holders of Bonds
that (A) (i) the STID Proposal has been approved and (ii) the
Security Trustee has announced such approval and (B) the
Extraordinary Resolution has been approved. Such condition(s) are
waivable at the discretion of the relevant Issuer.
Expected Timetable
Event Date
Announcement of Proposals, delivery of the STID 26 October 2021
Proposal and Notice of Meeting given to Bondholders
through the Clearing Systems.
Electronic copies of the Solicitation Memorandum
and the draft amendment documentation in respect
of each of the CTA, MDA, STID, the SW Tax Deed
of Covenant, the CP Agreement, Bond Trust Deeds,
Agency Agreements, the Security Documents and
the Account Bank Agreement to be made available
from the Tabulation Agent (copies of which are
obtainable by Bondholders upon request, free
of charge).
Instruction Fee Deadline: Latest time and date 4.00 p.m. (London
for receipt of valid Electronic Voting Instructions time) on 12 November
by the Tabulation Agent through the Clearing 2021
Systems for holders of Bonds to be eligible
for payment of the Instruction Fee.
Expiration Time: Latest time and date for (i) 4.00 p.m. (London
receipt of valid Electronic Voting Instructions time) on 18 November
by the Tabulation Agent through the Clearing 2021
Systems (such Electronic Voting Instructions
are irrevocable from this date), (ii) obtaining
a voting certificate from the Principal Paying
Agent and for the issuance or revocation of
a voting instruction given other than by way
of an Electronic Voting Instruction and (iii)
making other arrangements to be represented
or to attend (via teleconference) and vote at
the Meeting.
Time and date of the Meeting (via teleconference). 11.00 a.m. (London
time) on 23 November
2021 as set out
in the Notice of
Meeting
Notice of results of the Meeting to be given Promptly following
to Bondholders through the Clearing Systems. conclusion of the
Meeting on 23 November
2021
STID Voting Date. 25 November 2021
(or, if the Meeting
is adjourned, as
notified by SWS)
Announcement of results at STID level. 25 November 2021
or earlier, subject
to the STID Proposal,
should the Security
Trustee have received
votes in favour
of the Proposals
from DIG Representatives
representing more
than 50 per cent.
of the total principal
amount outstanding
of Qualifying Class
A Debt
If the STID Proposal is approved and the Security
Trustee has announced such approval and the
Extraordinary Resolution is approved
Payment of the Instruction Fee to those holders On the Payment
of Bonds who are eligible for payment in accordance Date which is expected
with the conditions set out in the Solicitation to be on or about
Memorandum. the fifth Business
Day following the
announcement of
the results at
STID level, if,
inter alia, the
STID Proposal and
the Extraordinary
Resolution are
both approved.
If the Amendment Conditions are satisfied
Execution of amendment documentation in respect On the Amendment
of each of the CTA, MDA, STID, the SW Tax Deed Date - currently
of Covenant, the Bond Trust Deeds, the Agency expected to occur
Agreements, the CP Agreement, the Security Documents within six months
and the Account Bank Agreement and implementation of the STID Voting
of the transactions set out in the STID Proposal. Date (but, in any
event, to be implemented
at a time which
is at SWS's sole
and absolute discretion).
All of the above dates are subject to earlier deadlines that may
be set by the Clearing Systems or any intermediary.
Bondholders are invited to access read-only copies of an
investor presentation prepared in connection with the Consent
Solicitation. Please refer to the Solicitation Memorandum for
access details.
General
Subject to applicable law and as provided herein, the Issuer
may, in its sole discretion, amend the terms of (save for the terms
of the Extraordinary Resolution or the Expiration Time), terminate
or withdraw the Consent Solicitation at any time up to the
Solicitation Amendment Deadline.
Bondholders are advised to check with the bank, securities
broker, trust company, custodian, Clearing System or other
intermediary through which they hold their Bonds whether such
intermediary will apply different deadlines for participation to
those set out in the Solicitation Memorandum and, if so, should
adhere to such deadlines if such deadlines are prior to the
deadlines set out in the Solicitation Memorandum.
In relation to the delivery or revocation of Electronic Voting
Instructions, in each case, through the Clearing Systems,
Bondholders holding Bonds in Euroclear or Clearstream, Luxembourg
should note the particular practice of the relevant Clearing
System, including any earlier deadlines set by such Clearing
System.
Only Direct Participants in Euroclear or Clearstream, Luxembourg
may deliver Electronic Voting Instructions. Bondholders who are not
Direct Participants in Euroclear or Clearstream, Luxembourg should
arrange for the accountholder through which they hold their Bonds
to deliver an Electronic Voting Instruction on their behalf to the
relevant Clearing System as more particularly described in the
Solicitation Memorandum. The deadlines specified by the relevant
Clearing System may be earlier than the Instruction Fee Deadline
and/or the Expiration Time.
Bondholders are advised to read carefully the Solicitation
Memorandum for full details of and information on the procedures
for participating in the Consent Solicitation.
A complete description of the terms and conditions of the
Consent Solicitation will be set out in the Solicitation
Memorandum.
For Further Information:
Further details on the Consent Solicitation and copies of the
Solicitation Memorandum can be obtained from:
The Sole Solicitation Agent
NatWest Markets Plc
250 Bishopsgate
London EC2M 4AA
United Kingdom
Telephone: +44 (0) 20 7678 5222
Email: liabilitymanagement@natwestmarkets.com
Attention: Liability Management
The Tabulation Agent
Lucid Issuer Services Limited
The Shard
32 London Bridge Street
London SE1 9SG
United Kingdom
Telephone: +44 20 7704 0880
Email: southernwater@lucid-is.com
Attention: Jacek Kusion / Harry Ringrose
Disclaimer
This announcement must be read in conjunction with the
Solicitation Memorandum. The Solicitation Memorandum contains
important information which should be read carefully before any
decision is made with respect to the Consent Solicitation. If any
Bondholder is in doubt as to the action it should take, it is
recommended to seek its own financial advice, including as to any
tax consequences, from its stockbroker, bank manager, solicitor,
accountant, independent financial adviser authorised under the
Financial Services and Markets Act 2000 (if in the United Kingdom)
or other appropriately authorised financial adviser. Any individual
or company whose Bonds are held on its behalf by a broker, dealer,
bank, custodian, trust company or other nominee must contact such
entity if it wishes to participate in the Consent Solicitation.
This announcement is issued by Southern Water Services Limited.
None of the Sole Solicitation Agent, the Security Trustee or the
Bond Trustee accepts any responsibility for the contents of this
announcement.
This announcement is released by Southern Water Services Limited
and contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of
United Kingdom domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("UK MAR"), encompassing information relating
to the Proposals described above. For the purposes of UK MAR and
Article 2 of Commission Implementing Regulation (EU) 2016/1055 as
it forms part of United Kingdom domestic law by virtue of the
European Union (Withdrawal) Act 2018, this announcement is made by
Richard Manning (Company Secretary) at Southern Water Services
Limited.
Legal Entity Identifier numbers:
Southern Water Services Limited - 54930007FJVKQFI3NF97
Southern Water Services (Finance) Limited -
213800BTY35K1724Z452
[1] Please see the article entitled "PN 17/17: Ofwat boss talks
of the 'decade of falling bills'"
(https://www.ofwat.gov.uk/pn-1717-ofwat-boss-talks-decade-falling-bills/)
where the Chairman of Ofwat, Jonson Cox is quoted as saying
"Customers often trust their local water company, but when firms
construct highly complex, offshore capital structures, they do so
at a cost to customer trust."
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END
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