Yorkshire Water Services launches consent bid for 17 series of bonds

By Sarah Lizee

Olympia, Wash., March 18 – Yorkshire Water Services Finance Ltd. and Yorkshire Water Finance plc launched a consent solicitation for several series of bonds, according to a notice.

The following bonds issued by Yorkshire Water Services Finance and guaranteed by Yorkshire Water Services Ltd. are included in the consent bid:

• £200 million 5.5% guaranteed bonds due 2037 (ISIN: XS0302054050);

• £65 million 1.8225% guaranteed retail price index-linked bonds due 2050 (ISIN: XS0304850927);

• £125 million 1.462% guaranteed retail price index-linked bonds due 2051 (ISIN: XS0275930203);

• £85 million 1.75756% guaranteed retail price index-linked bonds due 2054 (ISIN: XS0302790000);

• £125 million 1.46% guaranteed retail price index-linked bonds due 2056 (ISIN: XS0275222114); and

• £100 million 1.7085% guaranteed retail price index-linked bonds due 2058 (ISIN: XS0305261553); and

The following bonds issued by Yorkshire Water Finance plc and guaranteed by Yorkshire Water Services Holdings Ltd., Yorkshire Water Services Ltd. and Yorkshire Water Services Finance Ltd. are also included in the consent bid:

• £210,692,000 6.5876% bonds due 2023 (ISIN: XS0439817650);

• A$50 million 5.875% class A unwrapped guaranteed bonds due 2023 (ISIN: XS0923597354);

• £300 million 1.75% class A unwrapped guaranteed bonds due Nov. 26, 2026 (ISIN: XS2084420582);

• £135,476,000 6.454% bonds due 2027 (ISIN: XS0439817734);

• £250 million 3.625% class A1 guaranteed unwrapped fixed-rate bonds due 2029 (ISIN: XS0810290832);

• £254,974,000 6.6011% bonds due 2031 (ISIN: XS0439817577);

• £127,811,000 3.30666% guaranteed retail price index-linked bonds due 2033 (ISIN: XS0439817817);

• £300 million 6.375% guaranteed fixed-rate bonds due 2039 (ISIN: XS0439818039);

• £260 million 2.718% guaranteed retail price index-linked bonds due 2039 (ISIN: XS0440541752);

• £450 million 2.75% class A unwrapped guaranteed bonds due April 18, 2041 (ISIN: XS1984257029); and

• £50 million 1.803% guaranteed retail price index-linked bonds due 2042 (ISIN: XS0785387670).

Background

In December, Ofwat completed its final determination of price controls for Yorkshire Water Services Ltd. for the AMP period of 2020 to 2025.

As part of the determination, Ofwat has used a new line item, the “revenue reprofiling,” in the buildup of allowed revenues of Yorkshire Water. The company said it was unaware of the presentational change until the final determination was published by Ofwat on Dec. 16.

The revenue reprofiling line item has been introduced with a view to achieving a smooth bill quantum and bill profile, but with a net-zero impact on the revenues of Yorkshire Water over the AMP.

“The concept of ‘revenue reprofiling’ is not new, but in the previous periodic review the smoothing-out effect was achieved by adjusting the RCV run-off line item and the impact removed from the calculation of interest cover ratios in the CTA through the introduction of conformed interest cover ratios,” the company said in the notice.

“In its current presentation, Ofwat has introduced an amount in the buildup of allowed revenues rather than adjust the rate in percentage terms of RCV run-off.”

Yorkshire Water said it considers that the presentational change should be reflected in the interest cover ratios at the beginning of the AMP to ensure that they correctly reflect the approach taken by Ofwat and is consistent with the treatment of previous revenue timing adjustments under the CTA.

STID proposal

The conformed interest cover ratios themselves now require updating to reflect the revenue re-profiling line item used in the revised presentation by Ofwat to achieve the smoothing-out effect.

Yorkshire Water is therefore proposing to add new financial ratios to align the documents to reflect the revenue reprofiling line item in the PR19 final determination, and amend the levels of the conformed interest cover ratios and the class A ICR so that the latter ratios will no longer be of practical relevance, with secured creditors solely looking to the re-profiled interest cover ratios to test the interest cover of the obligors.

The company said bondholders should note that while the revenue reprofiling adjustment by Ofwat will have a small impact on annual gearing, Yorkshire Water is not proposing any amendments to the financial covenants that test debt to RCV and senior RAR.

Holders who deliver voting instructions by noon on April 7 will be eligible to receive a 0.05% instruction fee.

Payment of the instruction fee is conditioned on the STID proposal being approved and the security trustee announcing that approval.

The consent bid will expire at noon ET on April 16.

The STID voting deadline is April 20.

The solicitation agents are Lloyds Bank Corporate Markets plc (+44 20 7158 1726/1719, liability.management@lloydsbanking.com) and NatWest Markets plc (+44 20 7678 5282, liabilitymanagement@natwestmarkets.com).

The tabulation agent is Lucid Issuer Services Ltd. (+44 20 7704 0880, yorkshirewater@lucid-is.com).

Yorkshire is a Bradford, England-based water supply and treatment utility company.

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