London Southend Airport owner’s shares slump after demand to repay £200m loan early
Shares in the owner of London Southend Airport have slumped by over 40 per cent after a new demand to repay a near-£200m loan early was revealed,
Widnes-headquartered aviation and renewables group Esken, which is currently undergoing a winding-down process, has confirmed fresh claims that it breached a convertible loan agreement for the airport (LSA).
The group, which has already sold all its divisions and is currently in the process of divesting the airport as well, said it would be “value destructive” for all parties if it was forced to repay the money early. The convertible loan has a maturity date of August 2028.
The claims come after Esken revealed Carlyle Global Infrastructure Fund (CGI) had previously alleged a technical breach by the airport regarding the convertible loan agreement last September.
However, the airport has now received another notification that CGI is alleging a number of further breaches by LSA and that an acceleration notice has been issued demanding repayment of the loan in the amount of £193.75m by February 16, 2024.
In response, Esken said there had not been any payment defaults by the airport and that LSA’s cash flow has been in line with expectations.
Following the announcement, shares in Esken fell by more than 40 per cent to 0.50p in early trading.
A spokesperson for Carlyle said: “Following repeated and continuing defaults under our loan agreement since 2022,
“Carlyle can no longer wait patiently, putting the position of its investors and the ongoing success of London Southend Airport at risk.
“Esken is financially distressed and is not in a position to support the airport’s full recovery and growth nor execute an orderly sale of the airport.
“As an experienced investor in and operator of airports around the world Carlyle believes in, and is committed to, the future of London Southend Airport and understands its importance to airlines, passengers, employees and the local community.
“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.”
In a statement issued to the London Stock Exchange, Esken said: “Esken believes that any such acceleration would have significant adverse implications for LSA, the group and the exchangeable bondholders as it would be value destructive for all stakeholders, including CGI itself.
“Esken is disappointed that CGI has chosen to take this action based on purported technical defaults, as Esken had viewed CGI as a long-term partner in the continued development of the airport. Esken and LSA will be engaging with CGI to resolve the present issues.”
The firm added: “LSA 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 Covid-19 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. As a result, LSA continues to meet its obligations as they fall due.
“As previously announced, Esken is making good progress in addressing the maturity and terms of the exchangeable bond and towards the sale of its non-core assets.”
Esken noted that the firm seeking a new owner for LSA will be its focus, “with a view to crystallising shareholder value through securing the right long-term partner, which recognises 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,” Esken continued.
In a later statement, Esken added: “Esken is disappointed that CGI has chosen to take this action based on purported technical defaults of the convertible loan agreement.
“Esken and LSA are open to engaging with CGI to resolve the issue. Esken is confident it has a robust position, and there have been no payment defaults by LSA.
“LSA is an attractive strategic airport asset as aviation markets and the airport continue to recover from the unprecedented effects of the Covid-19 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. It is focused on securing the right long-term partner for the airport.”
A spokesperson at Carlyle said: “There have been many repeated and continuing defaults of the convertible loan agreement by LSA since 2022.
“Carlyle has sought to proactively engage with Esken and the airport to address these defaults. Carlyle has made numerous proposals to Esken and the airport to secure the airport’s long-term future, including up to £32m of new funding to the airport, for the benefit of all stakeholders including airlines, employees, passengers and the local community.
“Esken announced a planned sale of the airport in autumn 2022 and has not demonstrated any substantive progress to date.
“Carlyle will take all necessary steps to vigorously defend its investment in light of the defaults that have occurred.
“We look forward to seeing the substance of Esken’s proposal and in any event look forward to working with LSA to ensure the future of the airport.”