(Bloomberg) -- A group of Thames Water's senior creditors has submitted a new operational plan to the UK regulator as part of its bid to rescue and take over the ailing utility.
The proposal includes revised measures to reduce pollution and leaks through steps such as the replacement of older water mains, according to a statement Wednesday. The group is also set to soon finalize a revised proposal to restructure Thames Water's finances, which will include a write-off of several billion pounds of liabilities and new funds in the form of equity and debt.
Most Read from Bloomberg
Thames Water is undergoing a crisis, spurred by its excessive debt levels and poor environmental performance. The creditor group -- which has labeled itself the London & Valley Water consortium -- has been working on a rescue, but needs approval from regulator Ofwat on both the operational turnaround and the financial restructuring.
The creditors submitted a first version of their proposal before the summer, but have been revising it to take into account some feedback from Ofwat. Like the previous plan, the new one includes £20.5 billion ($27.4 billion) of investment and operational spending over the next five years, an amount that's in line with Ofwat's expenditure allowance.
The most contentious issues still to be ironed out are how much equity the creditors would have to inject and how big the debt haircuts will be, as well as finding an agreement with the regulator over operational targets and financial metrics.
Creditors were calling for special treatment for Thames on sewage fines but Environment Minister Steve Reed has insisted the company must be held to the same standards as any other water firm.
The London & Valley Water consortium includes Silver Point Capital, Elliott Management Corp. and Apollo Global Management Inc., as well as Aberdeen Group Plc and Assured Guaranty Ltd.
The plan is "a market solution which delivers financial resilience," the group said, "without the need for any taxpayer funding or government support."
Should a private rescue process fail, Thames Water could fall into a special administration regime, a temporary state-supervised process akin to insolvency for bankrupt businesses that provide critical services. The UK government appointed FTI Consulting to advise on a special administration process in case it's needed.