Esken proposes settlement deal over claims it breached £194m loan
Esken, the Widnes-based aviation and renewables group, has proposed a settlement with one of its main funders to avoid costly litigation.
The business, which is currently undergoing a winding-down process, revealed last month that it had been accused by Carlyle Global Infrastructure Fund (CGI) of breaching a £194m convertible loan agreement for its London Southern Airport (LSA) asset, which it says, if forced to repay, would be “value destructive” for all parties.
LSA is the last major asset remaining in Esken’s control and is undergoing a disposal process.
Esken today declared that, in conjunction with its legal advisers, it has investigated the validity of the alleged breaches of the convertible loan agreement and concluded that there is no default or event of default which gives CGI a current right to accelerate the loan, make demand or take enforcement action pursuant to the convertible loan agreement.
LSA has, therefore, disputed CGI’s claimed acceleration and demand for early repayment. Esken said it fully supports LSA’s position.
It says 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 will now be submitting a proposal to CGI with a view to reaching a negotiated settlement of the claims, and, thus a lifting of the claimed acceleration and demand for early repayment.
The group said the uncertainty of the outcome of this move has led to progress on the disposal of non-core assets, the potential £20m funding facility from certain of Esken’s larger shareholders into Esken Aviation, and the amendment and extension of the exchangeable bond, all as referred to in previous announcements, being disrupted significantly, with these transactions proceeding more slowly than anticipated and the terms for which may now be different than those which the company was previously hoping to achieve.
These actions were being taken to give the group a funding horizon through to the end of 2025 to allow a managed sale process of LSA as it recovers. A successful sale of LSA would see CGI repaid as a priority and ahead of its maturity date.
The company said it is monitoring the impact of such delays and assessing appropriate contingency planning, including exploring access to alternative funding to cover these delays.
However, if the group is unable to resolve the dispute with CGI and is either unable to progress the proposed transactions or find alternative funding in the coming months, then this could have a material adverse impact on it, Esken said.
