*

Creditors aim for mid-February agreement with Ofwat and

Thames

Water

*

Lenders may take up to 30% haircut on Class A debt

*

Creditors to receive minimum 10% equity stake in

recapitalised

company

(Adds Ofwat in paragraph 4, background para 6, more detail from

report para 10)

Jan 31 (Reuters) - Britain's Thames Water is edging

closer to a 16 billion-pound ($22 billion) rescue deal ‌with its

lenders that would keep the ailing utility out of temporary

public ownership, Sky News reported on Saturday.

A group of creditors ​holding 13 billion pounds of Thames

Water's total debt of 20 billion pounds is aiming ‍to sign an

in-principle agreement with regulator Ofwat and the company by

the ⁠middle of next month, ⁠the report said.

Thames Water, which has 16 million customers, has been at

the centre of an environmental scandal in Britain ‌in which it

has been fined more than 100 ​million pounds for sewage spills.

Its debt burden has also pushed it close to collapse.

Ofwat told Reuters it is continuing to engage with the

London & Valley Water ⁠investor group and is reviewing its

proposals to ‍assess whether ​they would improve the company's

operations and strengthen its finances.

Reuters could not immediately verify the Sky News

report. Thames Water did not immediately respond to a Reuters

request for comment.

London & ‍Valley Water is a creditor group comprising 15

institutions including Aberdeen Investments, Elliott Management,

PIMCO and Silver Point Capital who have pledged to retain their

ownership in the struggling utility until 2030 as part of a

rescue plan.

Under the proposal being discussed, lenders would take a

haircut of up to 30% on the Class A debt they are owed, an

increase from the 25% disclosed ​in an ‍announcement in October,

according to the report.

More than 13 billion pounds of existing value is expected to

be written off when a final deal is put to participating

investors, ​which include Assured Guaranty ( AGO ), Invesco ( IVZ ), Elliott

Management, Silver Point Capital and Farallon Capital

Management, the report said.

In exchange, creditors would receive a minimum 10% equity

stake in the recapitalised company, the report added.

An outline agreement is expected as early as the week after

next, with terms to be submitted for a Downing Street review in

the coming weeks, the report said.

Last year, Thames Water secured court approval for a 3

billion-pound debt lifeline, ​averting collapse and a state

rescue.

In December, Britain's biggest water supplier started to

take the steps needed to book court dates and proceed with a

recapitalisation plan led by senior lenders, as soon as they

agree terms with the government on ‍a deal.

($1 = 0.7306 pounds)