The Court of Appeal has been told that a plan to restructure Thames Water through a loan of up to £3 billion should not have been approved by the High Court as its terms are "mispriced and inappropriate."

Yesterday the Appeal Court started a three day hearing of an appeal against the High Court decision to allow Thames Water’s restructuring plan which would see it receive an emergency £3 billion loan from its Class A creditors.

In February, Justice Leech sitting in the High Court sanctioned a restructuring scheme proposed by Thames Water Utilities Holdings Ltd, TWUH, the parent company of Thames Water Group, TWG.

Under the plan Thames Water would be provided with £1.5 billion of emergency funding, with a further £1.5 billion potentially available, at a 9.75% interest rate.

A group of TWUH's Class B creditors, along with TWUH's parent company, Thames Water Ltd, TWL, and Liberal Democrat MP Charlie Maynard, are challenging the decision in the hearing which began yesterday in the Court of Appeal.

Andrew Thornton KC, for TWL said in written submissions to the Court of Appeal that the company plan was "designed by senior lenders for the benefit of senior lenders” and that “the outcome of this plan, if upheld, will enable senior lenders to extract from the group vast sums in fees and costs.”

According to a report in the Financial Times yesterday, filings made last week to the US Securities and Exchange Commission by American investment management firm Pacific Investment Management Company LLC (Pimco), one of the lenders involved in providing the emergency loan, show that Pimco has “already recorded a 17% paper profit” on its portion of the loan.