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 group Covalis Capital were also among the bidders.

Thames’s chief financial officer 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 in March.

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 by the end of June, and complete it in the second half of the year.

KKR is already involved in the UK water industry, as a minority shareholder in Northumbrian Water. Thames and Northumbrian have both asked the competition watchdog to examine a decision by the industry regulator, Ofwat, on how much they can increase bills over the next five years – although Thames has since agreed to delay its appeal.

Thames’ announcement on Monday 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.

Thames has been at the centre of growing public anger over the state of the privatised water industry, as consumers face steeply rising bills while companies have been criticised for pumping raw sewage into rivers and waterways.

Cat Hobbs, the founder and director of the campaign group We Own It, said: “KKR is a private equity firm that inspired a book and film about corporate greed called Barbarians at the Gate.

“In 1989, Thatcher’s privatisation of water opened the gate to the ‘barbarians’ and gave them the keys to the kingdom. With record levels of sewage pollution and water bills going up by 26% this week, what we are witnessing is the catastrophic failure of that privatisation experiment.”

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

The Guardian revealed in March that Thames had asked Ofwat to be spared billions of pounds of costs and fines over the next five years. The company said at the time it had “ongoing engagement with Ofwat as part of the recapitalisation process”.

Hobbs added: “If KKR secure a £4bn stake in Thames Water, this will do nothing to change the picture. They will still be drowning in … debt, still trying to dodge environmental fines, and will still prioritise shareholders over bill payers and the environment.”

She said putting Thames into special administration, a form of temporary nationalisation, to bring debts down before returning it to full public ownership was “the only way to reverse this catastrophe”.

Castle Water, based in Blairgowrie in Scotland, has more than 250,000 business customers and is co-owned by the Conservative party treasurer, Graham Edwards.

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.

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.