London Southend airport’s operator is facing further financial pressure as the provider of a convertible loan seeks to force early repayment.
While the loan from Carlyle Global Infrastructure Fund has a maturity date of August 2028, the fund has issued an acceleration notice demanding repayment of £193.75 million ($246.5 million) by 16 February this year.
London Southend’s parent company, Esken, says such an early repayment would have “significant adverse implications” for the airport operator, and the broader parent group.
“It would be value-destructive for all stakeholders, including [Carlyle] itself,” it adds. The company’s share price halved on 23 January in response to the disclosure.
Carlyle had already taken legal action against Esken towards the end of last year, alleging a technical breach by London Southend with respect to the convertible loan agreement.
London Southend submitted a defence in relation to this claim on 19 January.
While Esken is “confident” that London Southend has a “robust position” in the case, the airport operator has since received notifications – along with the repayment demand – alleging further breaches of the agreement.
Esken insists there have been no payment defaults in relation to the convertible loan, adding that London Southend is meeting obligations as they fall due while its cash-flow has been “in line with expectations”.
It adds that it is investigating the validity of the breach claims.
“Esken is disappointed that [Carlyle] has chosen to take this action based on purported technical defaults, as Esken had viewed [Carlyle] as a long-term partner in the continued development of the airport,” it states.
It maintains that London Southend is an “attractive” medium-term strategic airport asset, and that there is “considerable value” in its business.
Esken has been trying to divest London Southend and is continuing its efforts to find a new owner, adding that a successful sale would repay the convertible loan ahead of its maturity date.
