While U.K. regulators are still partial to the use of equity-related models for the financial restructuring and refinancing of domestic water companies, the recent use of debt financing by Glas Cymru and Welsh Water has paved the way for similar companies to consider accessing the capital markets, market observers say, and may be an important milestone for the industry.

With an estimated GBP10 billion to GBP15 billion required in new investments, the U.K. water companies are attracted to certain structural and ratings-related advantages which debt financing and securitization-style transactions offer them. "The part of the Welsh Water deal that might be replicated is the attempt to isolate or use bankruptcy-remote vehicles, as well as some of those structural elements that would isolate the strong credit of the water companies," said S&P analyst Anthony Flintoff. "Other water companies are looking at what has been done already and how that might be applicable to their business."

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