Centrus advises Yorkshire Water on £170m new Debt Service Reserve Guarantee

Transaction Overview

Yorkshire Water is a water supply and waste water treatment company serving the Yorkshire and Humber region. It treats and supplies approximately 1.3 billion litres of drinking water and collects, treats and returns approximately 1 billion litres of wastewater safely back to the environment every day.

Under Yorkshire Water’s ring-fenced financing structure, the business must have 12 months interest held as either cash or through committed amounts under liquidity facility agreements.

Previously, banks provided debt service liquidity facilities, whose agreements were continually renewed each year.

Interview with David Gregg, Head of Corporate Finance at Yorkshire Water

Centrus Solution

Centrus introduced an innovative five-year debt service reserve (DSR) guarantee provided by Assured Guaranty UK Limited (AGUK). This is only the second facility provided to UK utilities and the first in England. This was structured as an efficient long-term solution which also allows a recycling of bank capital into supporting other requirements in the business.

AGUK’s DSR guarantee was structured to fit within Yorkshire Water Services Limited’s existing financing documents and covers certain senior payment obligations due to secured creditors.

“Centrus has been a long-term financial advisor to Yorkshire Water and identified this innovative facility to us. We welcomed the opportunity to work with them, Linklaters, our legal advisors, and Assured Guaranty on structuring the debt service reserve guarantee to ensure an appropriate fit with our existing financing terms.

The successful outcome reflects a collaborative approach, providing a long-term, cost-effective solution to our requirements. We thank all our advisors, including Centrus, for their support and expert advice through a complex process.”

David Gregg, Head of Corporate Finance – Yorkshire Water

“Centrus is delighted to have introduced this solution and thereafter advised Yorkshire Water in delivering a valuable alternative to the long used bank market. This facility removes the need for the time consuming annual renewal of bank facilities for the debt service reserve and provides a welcome diversification of liquidity support to Yorkshire Water and its customers.”

Scott Wilsher, Senior Associate – Centrus

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