(Bloomberg) — As if Thames Water’s restructuring wasn’t complicated enough, banks that signed derivative deals with the utility company have formed another group to negotiate with the troubled company.

The group is made up of lenders who entered into these deals with Thames Water before its current difficulties, with these swap deals valued at around £1.3 billion ($1.7 billion) as of March. The banks have hired advisers from Simpson Thatcher & Bartlett LLP to form a group of creditors that will negotiate with Thames separately from other creditors, according to a document seen by Bloomberg News.

Last month, Moody’s said the Caa1 rating of Thames’ Class A bonds – towards the lower end of the junk bond spectrum – reflected the utility’s super senior bonds which “could further reduce the cash flow available to service Class A creditors. The derivative commitments would even exceed the new rescue funding Thames is currently seeking.

One of the banks sent a termination notice to Thames in August for repayment of a £65 million bond by the end of that month, according to filings. This led Thames to ask its other creditors for permission to increase its liquidity by freeing up money currently earmarked for derivatives liabilities.

A Thames Water spokesperson declined to comment. A representative for Simpson Thatcher did not immediately respond to a request for comment.

Derivatives are commonly used as a hedge by companies whose revenues are linked to inflation. A typical transaction involves a company like Thames Water entering into an agreement with a bank which exchanges the fixed rate coupon of one of its bonds for an inflation-indexed coupon, thereby transferring the risk associated with price fluctuations of the business to the lender.

While water companies like Thames report the notional value and market value of their derivative bonds, they are not included in official debt measures, so they have received little attention until now. ‘now.

Thames is currently raising emergency funding that will help it avoid a looming liquidity crisis and buy time to restructure more than £15 billion of outstanding debt. The company’s Class A creditors have already distanced themselves from Class B creditors in debt negotiations because the groups have different expectations for the outcome of a potential deal.

“The super-senior swap commitments could impact the recovery of senior debt,” Yeshvir Singh, a senior director at Fitch, said in an interview. “This has understandably caused concern among some investors.”

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