TEXT-S&P release on Southern Water Services (Finance) Ltd

(The following statement was released by the rating agency)

July 13 -Standard & Poor's Ratings Services said today that it has assigned its 'AAA' insured debt rating and 'A-' underlying rating to U.K.-based Southern Water Services (Finance) Ltd.'s (SW Finance) proposed GBP300 million class A bond maturing in 2056.

At the same time, Standard & Poor's affirmed its ratings on SW Finance's other debt issues, including the 'AAA' insured debt ratings on wrapped class A debt, the 'A-' rating on class A unwrapped debt, and the 'BBB' ratings on subordinated class B debt.

The 'AAA' long-term insured debt rating on SW Finance's class A senior bonds reflects the financial guarantee provided either by MBIA Assurance S.A. (AAA/Stable/--) or Financial Security Assurance (U.K.) Ltd. (AAA/Stable--).

The 'A-' long-term underlying senior secured debt rating on the class A bonds, and 'BBB' long-term subordinated debt rating on SW Finance's class B bonds, reflect a combination of the underlying credit quality of parent Southern Water Services Ltd.'s (SWS) regulated water and wastewater business, and various structural features designed to increase cash flow certainty for bondholders.

SW Finance is the funding subsidiary of SWS. Both entities are part of a subgroup of companies that are ringfenced from the rest of the group. We do not expect the ratings to be affected by the announced disposal of the Southern Water group by its ultimate owner Royal Bank Investments Limited, a subsidiary of the Royal Bank of Scotland.

This reflects that the disposal will take place at Southern Water Capital Ltd. (SWC), the ultimate holding company which sits outside the ringfence, and should not affect the companies within the ringfence.