Fitch cuts Southern Water

Fitch Ratings said it downgraded SW (Finance) I plc’s class A rating to BBB from BBB+. The issuer is the finance company of Southern Water Services Ltd.

“The downgrade reflects increased pressure on SWS's credit profile, as key credit ratios are not commensurate with the previous rating. In particular, gearing headroom is not sufficient to offset AMP7 (five-year price control period ending March 2025) weak average cash and nominal post-maintenance interest cover ratios (Pmicr),” Fitch said in a press release.

Additionally, two of three of the rating agencies now rate the class A debt below BBB+. As such, Fitch said SWS can no longer distribute dividends.

“In addition, SWS must discuss its plans for remedial action with the security trustee and if a trigger event remains unremedied for six months (or such longer period as may be agreed in a remedial plan), the security trustee would be entitled to appoint additional non-executive directors to the board of SWS. Moreover, if instructed by the majority creditors, the security trustee may order an independent review of the trigger event,” the agency said.

The outlook remains negative.

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