*

UK Court approves 3 billion pound senior creditors'

lifeline

*

Thames Water says ruling allows it to pursue turnaround

attempt

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Junior 'B Class' creditors had opposed the plan, will seek

to

appeal

(Adds quotes from Thames Water in paragraphs 5-6, judge in

paragraphs 8-9)

By Sam Tobin and Paul Sandle

LONDON, Feb 18 (Reuters) - Britain's Thames Water

secured court approval for a 3 billion pound ($3.8 billion) debt

lifeline on Tuesday, warding off the nationalisation of the

country's biggest water supplier and giving it time to sort out

its finances.

The government had been on standby to put Thames Water,

which is struggling with 18 billion pounds in debt, into special

administration, a form of temporary nationalisation aimed at

keeping the taps on in the event of financial collapse.

The lifeline, provided by senior creditors, will give Thames

an initial 1.5 billion pounds plus the potential for a further

1.5 billion, extending its funding until May 2026.

Without the approval the company said it would have run out

of cash in six weeks.

Thames Water called the approval a "significant milestone",

that would allow it to pursue its attempt to obtain new equity.

"Critically, it enables the management team to continue

progressing the turnaround," said Chairman Adrian Montague.

The package was controversial. A group of lower-ranked

creditors opposed it, calling its 9.75% interest rate too

costly.

Judge Thomas Leech, however, said in his written ruling that

the most likely alternative to the plan was Thames being put

into special administration, rather than the successful

implementation of the Class B creditors' proposal.

He added that "the plan is not unfair to the Class B

creditors" and that the sanctioned plan did not infringe

competition law. The junior creditors said they would seek

permission to appeal.

PUBLIC BACKLASH

Thames is at the centre of a public backlash against the

country's privatised water industry, blamed for polluting rivers

with sewage. The government wants Thames to avoid administration

and is focusing its efforts on reforming the sector.

With the rescue package in place, Thames Water, which has 16

million customers, still must overcome challenges to ensure it

can survive beyond 2026.

It needs to raise over 3 billion pounds in new equity as

well as restructure its debts, while at the same time improving

its infrastructure and environmental performance to avoid paying

millions in fines.

Complicating the picture for any would-be investors is the

price Thames Water is permitted to charge customers over the

next five years.

The regulator has said the company can hike bills by 35%

over that time, below the 53% rise it says it needs. It lodged

an appeal with Britain's Competition and Markets Authority on

February 14 in an effort to get improved terms.

The rescue package was provided by a group of Thames Water's

senior creditors including Abrdn, Apollo Global Management,

Elliott Investment Management, Invesco ( IVZ ), M&G and PIMCO.

($1 = 0.7931 pounds)