A subsidiary of Bermudian-based holding company Assured Guaranty Ltd has issued a £170-million, five-year debt service reserve guarantee to benefit Yorkshire Water Services Limited, a member of the Yorkshire Water group.

The DSR guarantee provided by Assured Guaranty UK Limited, which is rated AA by S&P Global Ratings and A1 by Moody’s Investors Service, will replace the existing liquidity facility provided by banks within the Yorkshire Water group’s securitisation structure.

AGUK’s DSR guarantee was structured to fit within Yorkshire Water Services Limited’s existing securitisation documents and covers certain senior payment obligations due to bondholders and other senior creditors.

Assured Guaranty Ltd is the only financial guarantee company currently providing financial guarantees in the UK and European financial markets. In addition to guaranteeing timely payment of principal and interest on bonds, Assured Guaranty provides guarantees for other debt service obligations of borrowers across the infrastructure and utilities sectors.

Dominic Nathan, senior managing director, AGUK, said: “Our debt service reserve guarantee provides a cost-effective and competitive alternative to bank facilities for large UK water and sewerage companies.

“As this transaction demonstrates, it fits well within an established whole business securitisation structure. We are delighted to have provided this product to Yorkshire Water and expect that other companies will also see the benefits of this type of financial guarantee from Assured Guaranty.

“Our strong credit standing and proven stability over more than three decades are reasons to be confident the DSR guarantee will be available for the long term without having to be renewed annually in the bank market.”

David Gregg, head of corporate finance, Yorkshire Water, said: “Yorkshire Water welcomed the opportunity to work with Assured Guaranty on the debt service reserve guarantee to be able to ensure an appropriate fit with our existing financing terms.

“The successful outcome reflects a collaborative approach providing a longer-term solution to meet DSR requirements that is beneficial to the group and in the best interests of Yorkshire Water’s customers.”

Yorkshire Water is the fifth largest water and sewerage company in the UK both in terms of regulatory capital value and customers served. It provides its services to approximately two million households and 140,000 business premises in northern England.