Thames Water lenders plan to fight Andy Burnham on nationalisation

A group of investors involved in a rescue bid for Thames Water could launch legal proceedings against Andy Burnham's new government if its attempts to take over the debt-ridden firm are rejected in favour of nationalisation.Pallas Partners describes itself as an "elite litigation and disputes firm" and will work alongside L&VW's current legal advisors, Akin Gump, Sky News reports.A source with links to the consortium said any litigation would be "a last resort" as the consortium intends to reassure Whitehall officials about any concerns over the proposed takeover deal."There is no legal action being taken right now," they said. "This is purely precautionary."L&VW is made up of various fund managers including Apollo Global Management, Elliott Management, Farallon Capital Management and Silver Point Capital, which have seized £17bn of Thames Water's £21bn debt mass.The group is pushing for a £10bn takeover deal of Thames Water in order to stop it being placed into a special administration regime (SAR), a form of temporary public ownership.The consortium is said to be concerned that Mr Burnham's arrival in Downing Street could see the deal rejected, after he previously spoke about his ambition for "public control" of water companies.He was quoted last month as saying: "I would say for Thames Water, that [greater public ownership] is what should be done."Thames Water's annual results led to renewed backlash last week, after it was revealed chief executive Chris Weston's pay had risen to £1.6m despite the company's financial woes.The takeover bid would reportedly inject £3.35bn of new equity into Thames Water alongside a £6.25bn sum of new debt, while writing off £9.6bn of Thames Water's existing debt.Read MoreEnvironment secretary Emma Reynolds cast doubt on whether the recovery plan would be accepted when she wrote to regulator Ofwat last month, expressing worries about its terms.She said: "I am not yet convinced that the Proposal demonstrates sufficient protection for consumers' interests."I understand that there will be some bill impacts in this price review period and further rises in the next period as a direct result of these regulatory adjustments."I am concerned that consumers will ultimately bear an undue cost for these adjustments."It is unknown if Ms Reynolds will remain as environment secretary in Burnham's new cabinet, but L&VW consortium's members are reportedly the new administration to take a harder line on the deal.Ofwat chair Iain Coucher wrote to Ms Reynolds this week to confirm that a fresh proposal was being devised."We will consider any such revised proposal, if requested to do so by the company's board, in accordance with our statutory duties, including to ensure that the interests of customers are adequately protected," he wrote.