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A Canadian government-funded export agency has suffered losses after lending Thames Water hundreds of millions of pounds, as the fallout from the crisis at Britain’s largest water company continues to widen.

Export Development Canada (EDC), which was created to help Canadian companies do business abroad, has been selling loans it had made to the utility in recent weeks, investors familiar with the deals said, adding that the agency sold them at deep discounts.

The crisis at Thames Water deepened in March when shareholders abandoned a plan to inject capital into the company and declared it “not worth investing in.”

The company, which provides water and sewerage services to London and surrounding areas, is struggling with a mountain of debt of £18 billion and is under pressure to modernise its dilapidated infrastructure.

Ottawa-based EDC originally provided a loan to the utility in 2018 to support an investment in Thames Water by the Ontario Municipal Employees Retirement System (Omers), one of Canada’s largest public pension funds. Omers recently wrote down the value of its 31 percent stake in the company to zero.

EDC’s website states that the company’s mission is to “help Canadian companies of all sizes succeed on the world stage.” Services for Canadian exporters include trade knowledge, risk mitigation and providing global connections.

Between 2018 and 2022, it loaned Thames Water hundreds of millions of pounds to “support Canadian direct investment abroad.” The Canadian group involved was named as Omers, according to documents released by the agency.

Although the loans EDC made to the utility were prompted by Omers’ decision to acquire a stake in Thames Water, they were separate from the amounts invested by the pension fund.

In early August, EDC sold £313 million worth of Class A debt at auction, according to four investors. An auction announcement seen by the Financial Times does not mention EDC by name, but the dates on which the loans were originally signed match a figure EDC told Thames Water.

EDC also sold more than £300 million of riskier Class B loans last month, according to two investors familiar with the matter. These lower-ranking debt securities have traded for as little as 27 pence per pound in recent weeks.

“We have been closely following the recent challenges faced by the utility and are evaluating the best course of action to manage our credit risk in the company in light of the regulator’s recent decision and Omers’ decision to write down its stake,” EDC said in a statement to the FT.

“As part of the careful management of our financing portfolio, we have put processes in place to address these situations and minimize the impact on EDC,” adding that they would not speculate on specific debt assignments.

In addition to providing loans to support Omers’ investments, EDC said it had also “facilitated more than 30 Canadian companies to connect with Thames Water.”

Canadian institutions are most affected by Thames Water’s problems. The British Columbia Investment Management Corporation, the largest public pension fund in British Columbia, holds an 8.7 percent stake in the company.

Last month, Thames Water lost its investment-grade credit ratings, meaning the company is in breach of its licence conditions and the group’s renationalisation is edging closer. Even the utility’s key bondholders are now facing debt write-offs.

The company has come under closer scrutiny from regulator Ofwat to avoid potentially heavy fines for breaching its licence.

It needs to refinance over £1 billion of loans by the end of the year, only part of which can be rolled over. Although the money will last until May, the company needs to raise £750 million in equity by then and a further £2.5 billion by 2030.

Additional reporting by Gill Plimmer