US private equity is closing in on a deal to buy troubled Thames Water as it races to avoid renationalisation.

Buyout giant KKR – dubbed the ‘barbarians at the gate’ – is the frontrunner to take control after it was named as preferred bidder by the water supplier.

Thames Water, which serves 16m households in London and the South East, was plunged into crisis last year when its owners refused to provide new funding.

The saga brought Thames Water to the brink of collapse and left it facing the prospect of a taxpayer bailout. 

In the latest blow, finance chief Alastair Cochran last week announced his shock departure.

A deal with KKR would result in a ‘material impairment’ for some lenders, meaning some of the £16billion of debt Thames Water owes would be written off, a spokesman for the firm said yesterday. 

Rival suitors included Hong Kong’s CKI Infrastructure, UK-based Castle Water and a group of investors led by investment service Covalis.

KKR reportedly put forward a £4billion proposal last month and, in contrast to other bidders, vowed not to break up the firm. 

Thames Water said it hopes to complete the cash injection before the end of June, but it is not guaranteed that the deal will go ahead.

KKR, which has a 25 per cent stake in Northumbrian Water, was dubbed the ‘barbarians at the gate’ for its fearsome reputation after buying out tobacco group RJR Nabisco in 1988, which was turned into a book by journalists Bryan Burrough and John Helyar.