London Southend Airport is faced with the US Carlyle Group demanding repayment of a loan worth around $247 million. Legal proceedings were initiated in September 2023 and payment should now be made by February 16, 2024.

It's about a convertible loan that was granted to Southend owner Esken in 2021. The loan-granting private equity firm from the USA alleges that clauses of the loan agreement were violated. For this reason, legal steps were taken in September 2023 and the loan was required to be repaid.

Actually, the loan would not have been due for repayment until August 2024. However, they are now demanding that the money plus interest be received in a Carlyle Group account by February 16, 2024. This represents a significant problem for Esken, the operator of London-Southend Airport. Investors were warned in a mandatory notification of significant negative effects on business operations. This resulted in the share price falling sharply in the short term.

The group explained that it was using legal means to defend itself against the repayment and that there had been no late payment of this loan, which contractually agreed can also be converted into an equity investment. The cash flow of London Southend Airport would also meet management expectations.

Hit particularly hard by the pandemic

The airport, which is located near the British city of Southend-on-Sea, was hit much harder by the corona pandemic than the other airports assigned to the capital London. Air traffic is recovering very slowly because many connections that existed before the crisis have not yet been reactivated. Some carriers have turned their backs on this airport completely or, as was the case with the “old” Flybe, went bankrupt.

Incidentally, the lender sees things very differently when it comes to late payments: A spokesman told Reuters, among other things: “After repeated and persistent defaults under our loan agreement since 2022, CGI can no longer wait patiently. We have made numerous proposals to Esken and the airport to secure the long-term future of the airport and look forward to stable ownership of the airport by an experienced and financially strong company.”

Does Esken want to sell or not?

What exactly Esken plans to do with London Southend Airport is unclear. They were looking for a buyer for some time, but the project was put on hold again. This could be due to the fact that the desired purchase price could not be achieved on the market. Now it emphasizes in a statement that the airport is “an attractive strategic airport asset in the medium term”. Esken also assumes that air traffic will recover and that there will be numerous new flight connections this year.

“Esken's board believes that the LSA business has significant value and continues to support the company's liquidity needs in accordance with the recovery plan. As a result, LSA will continue to meet its obligations as they become due. Esken remains focused on finding a new owner for LSA to increase shareholder value by finding the right long-term partner that recognizes the inherent strategic opportunities and is best positioned to support future growth . A successful completion of the sales process would in any case repay the convertible loan early,” can be read in a statement from the SEN operator.