The Thames at Datchet, a mile from where I write.

Travel a mile east of Windsor and you get to Datchet, on the one side of the river are the grounds of Windsor Castle, on the side pictured is the road to Old Windsor, this picture is taken pretty well where I live, that water flows down from Little Marlow sewage works under Windsor Bridge and on to London.

The Thames Water crisis is already an environmental issue. A wet winter even caused Thames to close Eton College for its first week of the Spring Term. But the environmental problems are only the beginning. Though Thames Water can continue for a year on its cash reserves, its parent, Kemble can no longer afford its “school fees”, earlier this month it defaulted on one of its debts, worse is likely to come. The risk of a default on Thames is considered serious enough to prompt this headline

The last thing Britain needs right now is another debt crisis. The last one sunk the Truss Government and was enough to force the Bank of England to take unprecedented interventions.

According to the Guardian, “Whitehall officials” see the risks of failure of Kemble, the parent of Thames Water, to pay the interest on its £18bn of debt as sparking contagion that could hike the cost of borrowing and further undermine confidence in UK plc .

Thames is what financiers call a “burning platform” and the risk is that no action will be seen by the markets as a failure of Government. For this reason, the Government has devised “Project Timber” which reputedly takes Thames into temporary state control, reducing the value of equity holdings to zero and offering those who have leant money to Thames a substantial haircut on the value of the bonds they have issued.

The two Thames Water pension schemes, one mirroring the other, have debts of their own and the last time the Trustees called for a deficit reduction contribution, the contribution of just over £20m was paid by the issuance of more shares in the operating company – not cash .

Commenting on this blog, pension financier Edi Truell stated

Surely that’s the way to go with this, but the trustees and regulators do need to get on the front foot; and Ofwat accelerate its pronouncements on bills, still slated for June.

The DB pensions are part of the problem and the Government would be well advised to remind the Trustees that alternative and additional sponsors for the pension debt are available.

There is no good news story at Thames. The Government are not some “Deus Ex Machina” who can wipe the slate clean and allow a newco to be created, debt free and capable of cleaning up our rivers without substantial hikes to consumer water bills. There is , it seems, a series of deals to be done which can individually help reduce the pain. Pension schemes can hope that a Government intervention can   providing them – as equity investors with some prospect of long-term holding of shares in a viable entity. Bond holders can hope that they get terms for their debt at least as good as what the market is valuing their debt and Ofwat can countenance a contribution from the consumer to ease the pain on the wider tax-payer.

I pay bills to Thames Water, I use the Thames for recreational use and I care about confidence in our financial markets, not least because I am a pensioner and the holder of a mature DC pot. I also have a mortgage and do not want to see a further surge in interest rates if there is contagion over the mis-handling of the Thames Water debt crisis

We all have interest in the proper resolution of the Thames Water challenge. This does not look like it can be solved by Government , lenders, equity holders , regulators or consumers in isolation. It looks to me like a problem we all have a stake in and should all be working together to find resolution.

We should prepare for the worst and plan for the best. That includes looking at those pension schemes and taking whatever help is on the table.

The last thing Britain needs is another debt crisis, with resolution and decisive action, I suspect that a crisis can be averted, we cannot let matters continue to drift.