United Utilities Water sells £250m of seven-year notes

29 December 2008

On 18 December 2008, United Utilities Water PLC (A3, stable; A-, stable) sold £250m in seven-year notes via the group's medium-term note programme.  Joint lead managers were Royal Bank of Canada Capital Markets and HSBC.

This further enhances the group's robust financing position and extends headroom from the position indicated on 26 November 2008 in the group's results for the half-year ended 30 September 2008, when the group said it was funded to cover its projecting financing needs into 2010.

The bonds will carry an annual fixed rate coupon of 6.125% and will be sold at a re-offer price of 99.834.  This price reflects a margin of 295bps above the risk-free rate (the yield on government bonds of equivalent maturity) in order to compensate investors for taking UUW's credit risk.

This is the first conventional syndicated bond issue by the group since the first quarter of 2005.  At that time, UUW was able to borrow for 30 years at an equivalent margin to LIBOR of just over half a percent.  The equivalent margin on this latest deal is some five times wider and has a significantly shorter maturity.  This reflects the development of credit spreads in recent times.

Technical Information:
Issue closed on 29 December 2008
ISIN: XS0406709120.