Blow to Thames Water as preferred bidder pulls out

Thames Water has suffered a major setback in its attempt to secure its future after US private equity giant KKR pulled out of plans to buy the company.

KKR had been selected as the preferred partner to inject £4bn of much needed cash into the UK's biggest water company.

The setback increases the possibility that the company will collapse into a government supervised administration.

Thames called the news "disappointing" but said it would proceed to work with other potential investors who submitted earlier expressions of interest.

The company is effectively owned by its lenders and a consortium of them has prepared an alternative plan to raise equity which sources say is ready to go and fully funded.

KKR's withdrawal comes on the same morning that an independent commission released interrim finding of a review into how the water industry can be reformed - a review which many saw as potentially supportive in attracting new investment.

Sources close to the situation told the BBC that the politicisation of the water industry was a major disincentive for KKR to pursue a deal.