(Bloomberg) -- Goldman Sachs Group Inc. has executed more than £1 billion ($1.3 billion) of trades in Thames Water’s bonds in September, as it makes a market between original investors exiting the beleaguered utility and opportunistic players scooping up the debt at a discount.

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Hedge funds and distressed funds are continuing to bid for the debt of the UK’s largest water provider, said dealers at the US bank in a note to clients seen by Bloomberg on Monday. Around £3 billion of bonds have changed hands in total this month, according to the note.

The trading comes as the company has kicked off talks with creditors while it struggles to raise equity. Worries the firm will soon run out of cash led S&P Global Inc. and Moody’s Ratings to downgrade its Class A debt — deemed the safest — by five and six notches respectively last week. They also downgraded its riskier Class B debt.

“The Thames structure remains topical at GS as risk continues to change hands post downgrade,” the bank said in the note. “Selling was initially in Class B debt, but more recently we’ve been sellers of Class A risk as well.”

Buyers are favoring the more illiquid and lower cash price paper, as the market difference between shorter-dated and longer-dated bonds flattens, the note added. Companies with large amounts of debt often have bonds with wildly differing cash prices because notes are issued over multiple years at different points in the rate cycle.

Thames Water’s €1 billion ($1.1 billion) of bonds due January 2031 are indicated at 72.8 cents on the euro, down almost 3 cents since the beginning of September, according to data compiled by Bloomberg.

Goldman Sachs has also been trading some of Thames’s bank debt, with £145 million changing hands via its desk since April, according to the note. A spokesperson for Goldman Sachs did not immediately respond to a request for comment.

S&P sees a debt restructuring — and consequently a default — as likely in the coming 12 months. The company has said it does not expect to receive funds in the form of equity ahead of a final determination by regulator Ofwat, expected at the earliest on Dec. 19.

Thames has been negotiating with a group of creditors holding £10 billion of the company’s Class A debt over options to delay a potential liquidity shortfall. The group of creditors — including investors from BlackRock Inc. and Elliott Investment Management — has been working on its own plan to address the need for new funds and the unsustainable debt pile.

(Updates with bond prices in sixth paragraph. An earlier version corrected the total bonds traded by Goldman.)

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