Southern Water is seeking to borrow nearly £4bn from investors over the next five years as it faces pressure to invest more in its network.
According to Companies House filings reported by the Financial Times, the company, which has over 4m customers, already carries £6bn in debt.
The filings also show that liabilities related to derivatives have also soared past £1bn.
The move to borrow more cash comes following months of crisis at Thames Water. The fall-out has been spilling out across the sector.
The debt rating of the UK’s biggest water supplier was downgraded last week to the lowest echelons of junk, as it faces the prospect of nationalisation amid long-running financial issues.
Yields on Southern’s bonds, which are due in 2026, have more than doubled over the last six months to 13.5 per cent, according to the FT.
A presentation to debt investors published on Southern Water’s website revealed plans to tap its backers for £3.8bn in debt over the next half-decade. The firm cited a “proven track record of capital raising” from its owner, Macquarie.
Some £650m in equity is also needed as part of a push from the UK’s water firms to upgrade creaking infrastructure, a key factor behind the growing number of sewage spills affecting the sector.
In July, the credit ratings agency Moody’s placed Southern’s credit rating on review for a possible downgrade, less than a week after stripping Thames of its investment grade score.
Moody’s cited draft proposals from Ofwat on the level at which UK water bills will be capped over the next half decade for its decision, as well as millions in impending fines.
Lobby group Water UK has warned that the current bill ceiling is too low and there is a risk water firms may not be able to raise enough cash to invest in stopping sewage spills and pollution incidents.
Southern Water and Macquarie have been approached for comment.