The owner of London Southend Airport (SEN) has warned of “significant implications” for the facility amid demands to repay a loan worth almost $247 million by February 16, 2024.
A fund managed by US private equity firm Carlyle Group commenced legal action against Esken, the sole owner of London Southend in September 2023 over alleged breaches of the terms of a convertible loan agreement it made with the airport owner in 2021. A convertible loan agreement is a form of debt that can be transformed into an equity stake under certain conditions.
The Carlyle Global Infrastructure Fund (CGI), which holds more than $7 billion worth of assets under its management, has demanded that the loan be repaid more than four years before its maturity date of August 2028. The investment fund is alleging further breaches by LSA and has issued an acceleration notice to the airport owner.
Esken saw its share value plummet 44% on January 22, 2024, after it warned investors that it could be forced to pay the loan before the deadline of mid-February 2024. Esken’s current market capitalization is slightly under $6.3 million.
Esken has said it has issued a “robust” defense to the legal claim brought by CGI and added that there has not been any default of payments by Londo Southend Airport regarding the loan, while its cash flow has been “in line with expectations”.
Esken agreed a deal with CGI in 2021 to raise financing to spend on the development of the airport. The convertible loan agreement could be converted into a 30% equity stake in the Essex airport under certain conditions. However, Esken now states that CGI is alleging several further breaches of the agreement, adding that the fund’s demands “would have significant adverse implications” for the airport and “would be value destructive for all stakeholders, including CGI itself”.
Esken, which has been attempting to find a new buyer for the airport, adds that it is “disappointed” by CGI’s demands, having previously viewed CGI as a “long-term partner in the continued development of the airport”.
“Following repeated and continuing defaults under our loan agreement since 2022, CGI can no longer wait patiently,” said a CGI spokesperson to Reuters. “’We have made numerous proposals to Esken and the airport to secure the airport’s long-term future and look forward to stable ownership of the airport by an experienced and financially strong entity.”
Esken added that London Southend Airport is “an attractive strategic airport asset in the medium term as aviation markets and the airport continues to recover from the unprecedented effects of the pandemic.”
“The board of Esken believes that there is considerable value in the LSA business and continues to support its liquidity needs in line with the recovery plan,” said an Esken statement. “As a result, LSA continues to meet its obligations as they fall due. Esken continues to focus on seeking a new owner for LSA, to crystallize shareholder value through securing the right long-term partner, which recognizes the inherent strategic opportunity and is best placed to support future growth. A successful outcome to the sale process would in any event repay the convertible loan instrument ahead of its maturity date.”
London Southend Airport currently offers scheduled flights to Amsterdam (AMS), Alicante (ALC), Geneva (GVA), Grenoble (GNB), and Paris (CDG) – all operated by easyJet. During the summer of 2024, there will also be services to Bourgas (BOJ), Faro (FAO), Malaga (AGP), and Palma (PMI). A new six-times weekly Boeing 737 service operated by Italian airline Aeroitalia to Milan (MXP) begins on March 25, 2024.
