Assured Guaranty has $10bn exposure to troubled UK water utilities

Bermuda-based credit insurer Assured Guaranty has amassed more than $10 billion of exposure to some heavily indebted UK water utilities, and could end up paying lenders in the case of defaults, the Financial Times reported yesterday.

Reuters, citing the FT, said Britain's largest water utility Thames Water was under the threat of nationalisation before its shareholders stepped in on Monday to help plug a financial black hole.

Thames Water had amassed a debt pile of 14 billion pounds ($18.14 billion), casting a shadow over the entire sector, which needs to upgrade.

Assured Guaranty has built about $1.9 billion in exposure to Thames Water, with Southern Water being its largest non-US exposure at $2.2 billion, the FT said, citing results published in March.

However, a senior managing director at Assured Guaranty told the FT that the insurer feels these water companies have a strong debt profile.

"We feel the UK water company debt we have insured has a strong credit profile, as it provides an essential public service and is in a well-regulated industry where we guarantee the senior level debt," the newspaper quoted manager Nick Proud as saying.

Assured Guaranty did not immediately respond to Reuters' request for a comment.