Esken faces early repayment of £194m loan following new breach allegations
Esken, the Widnes-based aviation and renewables group currently undergoing a winding-down process, has been hit by further claims of breaching a convertible loan agreement for its London Southern Airport (LSA) asset, which it says, if forced to repay, would be “value destructive” for all parties.
The group has divested all its divisions and LSA, which it is in the process of selling, is its only main operating business.
Last September, Esken revealed Carlyle Global Infrastructure Fund (CGI) had alleged a technical breach by LSA with respect to the convertible loan agreement between LSA and CGI. Esken said it is confident LSA has a robust position in relation to the claim.
However, LSA has now received notification that CGI is alleging a number of further breaches by LSA with respect to the convertible loan agreement and that CGI has issued an acceleration notice to LSA, demanding repayment of the loan in the amount of £193.75m by February 16, 2024.
The convertible loan has a maturity date of August 2028.
Esken said there have been no payment defaults by LSA in relation to the convertible loan agreement and LSA cashflow has been in line with expectations. Esken and LSA are investigating the validity of the alleged breaches in conjunction with advisers.
Esken said it 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.
The group said it 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.
Esken said 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.
In addition, Esken said it continues to focus on seeking a new owner for LSA, 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.
