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US private equity group Carlyle is seeking to force an early repayment of a loan of just under £200mn provided to the owner of London Southend Airport, alleging multiple breaches of contract.
Aviation group Esken, which owns LSA, and Carlyle Global Infrastructure Fund have for months been embroiled in a legal row in London’s High Court over a £193.75mn convertible loan extended by the US private equity investor in mid-2021.
Carlyle has argued that several breaches of financial covenants on the loan agreement by Esken since November 2022 meant the sum should be repaid by the middle of February — more than four years ahead of schedule.
Esken on Tuesday said in a stock exchange announcement that it had submitted a defence in relation to Carlyle’s claim, stating that any acceleration of the repayment of its obligations would be “value destructive for all stakeholders”, including CGI. Esken’s shares fell 48.8 per cent.
“Esken is disappointed that CGI has chosen to take this action based on purported technical defaults,” the company said, adding that it was making “good progress in addressing the maturity and terms of” the exchangeable bond in question.
The loan disagreement has thrown into doubt the future of LSA, which a person close to Carlyle said had struggled more than bigger rivals to bounce back from a drop in passenger numbers brought about by the Covid-19 pandemic.
One of the capital’s smallest airports, 40 miles east of central London, LSA has in recent years been dropped by low-cost carriers Wizz Air and Ryanair, though it retains an important customer in easyJet.
LSA has been up for sale for about a year. Carlyle could yet become the outright owner of LSA if Esken were unable to repay the almost £200mn loan. A person close to Esken accused Carlyle of aggressive tactics designed to secure the airport for a knockdown price.
Carlyle — which has about $380bn of assets under management and stakes in airports globally — said in a statement that it had made “numerous proposals” to Esken and LSA to secure the airport’s future. Carlyle’s latest proposal included £32mn of new funding.
However, “repeated and continuing” breaches of contract meant Carlyle could “no longer wait patiently” for the loan’s repayment, the private equity group said.
