The owner of London Southend Airport has proposed a settlement agreement over demands to repay a £194m loan early.
Shares in Esken slumped by over 40 per cent last month after fresh claims were made that it breached a convertible loan agreement for the airport (LSA).
The Widnes-headquartered aviation and renewables group, which is currently undergoing a winding-down process, has already sold all its divisions and is currently in the process of divesting the airport as well.
At the time, the company said it would be “value destructive” for all parties if it was forced to repay the money early. The convertible loan has a maturity date of August 2028.
The claims came after Esken revealed Carlyle Global Infrastructure Fund (CGI) had previously alleged a technical breach by the airport regarding the convertible loan agreement last September.
In a statement issued to the London Stock Exchange, Esken said: “LSA has 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 fully supports LSA’s position.
“As previously noted there have been no payment defaults by LSA in relation to the convertible loan agreement and LSA cashflow has been in line with expectations.
“Notwithstanding Esken and LSA’s robust position in relation to CGI’s claimed acceleration and demand for early repayment, and in order to avoid costly litigation and unnecessary value destruction for all stakeholders (including CGI), Esken will 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 uncertainty of the outcome of the above has led to progress on (i) the disposal of non-core assets; (ii) the potential £20m funding facility from certain of Esken’s larger shareholders into Esken Aviation and (iii) 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 in order 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 is monitoring the impact of such delays and assessing appropriate contingency planning, including exploring access to alternative funding to cover these delays.
“If the group is unable to resolve the dispute with CGI and the group is either unable to progress the transactions mentioned above or find alternative funding in the coming months, then this could have a material adverse impact on the group.”