The Lemon Fool

Thames Water is in the news for it[1], but the question of defaulting is broader than that.

When I've looked (cursorily) at fixed-interest investments, I see different kinds of terms. For example, cumulative vs non-cumulative. And provision for explicit conditions under which a debtor could miss a payment without going into full-blown default. I believe it happened to a lot of bank debt after 2008.

Is that just PIBs and Prefs, or do those kinds of things also apply to regular corporate bonds? If the latter, could that mean (for example) that Thames Water is still conforming with the terms of its debt?

[1] Thames Water thread here for discussion of their problems.

UncleEbenezer wrote:Is that just PIBs and Prefs, or do those kinds of things also apply to regular corporate bonds? If the latter, could that mean (for example) that Thames Water is still conforming with the terms of its debt.

Experts in quoted Corporate Bonds go through the conditions with a fine toothcomb. They are looking for bonds where the risk is mispriced even if only slightly. I don't think any of the Thames Water loans and bonds are quoted thpugh.

Corporate bonds do sometimes have special conditions. Eg the Enquest 7% 2022 bond under certain conditions paid interest in PIK notes instead of cash. Here's an announcement of one of the PIK payments:

https://www.investegate.co.uk/announcem ... nt/6230577

Alaric wrote:go through the conditions with a fine toothcomb.

Always comb your teeth before getting into the meat of the document...

UncleEbenezer wrote:Is that just PIBs and Prefs, or do those kinds of things also apply to regular corporate bonds? If the latter, could that mean (for example) that Thames Water is still conforming with the terms of its debt?

Yes and no. There is no way the debt is still conforming. The issuer (Kemble Water Finance) has served a default notice. The value of the bond is on the floor.

https://www.ft.com/content/58834a3a-875 ... 8e62fd662c

GS