London Southend airport faces demands for immediate £194m loan repayment

The owner of London Southend has warned of ‘significant’ implications for the airport amid demands it repay a loan worth almost £194million by 16 February.

A fund managed by US private equity giant Carlyle Group took legal action against London Southend last year over alleged breaches of the terms of a convertible loan agreement it made with the airport in 2021.

The Carlyle Global Infrastructure Fund (CGI), which has more than $7billion in assets under management, wants the loan to be repaid more than four years before its maturity date of August 2028.

CGI wants LSA to repay the loan more than four years before maturity

Esken, the airport’s owner, said it had issued a ‘robust’ defence to the legal claims, adding that there have been no payment defaults by LSA in relation to the convertible loan agreement while cashflow ‘has been in line with expectations’.

A convertible loan agreement is a form of debt that can be transformed into an equity stake under certain conditions.

Esken made the deal with CGI in 2021 in efforts to help finance and develop the transport hub. The convertible loan agreement could be converted into a 30 per cent equity stake in the Essex airport under certain conditions,

The group said LSA is aware that CGI is now ‘alleging a number of further breaches’ of the agreement, adding that the fund’s demand’s ‘would have significant adverse implications’ for the airport and ‘would be value destructive for all stakeholders, including CGI itself’.

Esken, which is attempting to find a new buyer for the airport, added it was ‘disappointed’ by CGI’s demands, having previously ‘viewed CGI as a long-term partner in the continued development of the airport’.

A spokesperson for Carlyle told Reuters: ‘Following repeated and continuing defaults under our loan agreement since 2022, Carlyle can no longer wait patiently.

‘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.’

Esken 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.’

‘Esken 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.’