Thames Water has picked the US investment firm KKR to take a stake in the business, as the embattled water company fights to stave off nationalisation.

The UK’s biggest water supplier, which is struggling under a debt pile of close to £20bn, said it had selected KKR as a “preferred partner” as it seeks to secure fresh equity funding for its operations by the end of June. The New York-based private equity firm is expected to acquire a stake in Thames worth £4bn.

The UK-based business water retailer Castle, with more than 250,000 customers, had also put in a bid for £4bn, Bloomberg News reported last week. Hong Kong-based CK Infrastructure Holdings, part of CK Hutchison, and London-based investment firm Covalis Capital were also among the bidders.

Thames’s chief financial officer had quit on Friday. Alastair Cochran, who had also recently served as interim co-chief executive at Thames, is leaving at a critical time, after Thames agreed to take on billions more debt from its creditors after a court ruling earlier this month.

Thames, which serves 16 million customers in London and south-east England, said: “The company remains focused on putting Thames Water on a more stable financial foundation, implementing its turnaround plan and delivering a market-led solution that is in the best interests of customers, UK taxpayers and the wider economy.”

It expects to agree a deal with KKR – the private equity group that inspired the story of corporate greed, Barbarians at the Gate – by the end of June, and complete it in the second half of the year.

It means that senior bondholders will take a hefty haircut on their loans, as expected. KKR’s proposal will lead to a “material impairment” of the company’s class A debt and discussions continue in relation to other aspects of the proposal, Thames added.

Most of the bidders were seeking reassurance that they would be able to avoid or manage future fines and punishments for poor performance.

Two weeks ago, Thames won approval from the court of appeal for a £3bn emergency debt bailout from its existing creditors to avoid an immediate collapse into a special administration regime, a form of temporary nationalisation.

The company’s future has been under intense scrutiny and there are concerns over the state of its ageing assets, which were the subject of a recent BBC documentary.