Esken Limited, an aviation group, has provided an update on its negotiations with Carlyle Global Infrastructure Fund (CGI) and Cyrus Capital Partners regarding a recapitalization proposal for its wholly owned subsidiary, London Southend Airport Company Limited (LSA). The proposal aims to resolve a dispute in respect of a convertible loan between CGI and LSA. The board of LSA, along with its advisors, has negotiated a proposal that would be funded by CGI and Cyrus. Esken and its subsidiary, Esken Aviation Limited (EAL), have until 4 March 2024 to accede to the proposal.
The recapitalization proposal includes a commitment by LSA to make an application to court for a restructuring plan under the Companies Act 2006 if Esken and EAL do not agree to the terms. This proposal would result in EAL's shareholding in LSA being significantly reduced to a minority interest. The funding of the proposal agreed with the board of LSA includes support from both CGI and Cyrus to secure the future of the airport.
Esken is urgently reviewing and assessing the terms and potential financial impact of the recapitalization proposal on the company and its wider stakeholders. The uncertainty created by CGI's demand for repayment has stalled progress on various initiatives, including the disposal of non-core assets, a potential £20 million funding facility, and the amendment and extension of the exchangeable bond.
In parallel with the assessment of the recapitalization proposal for LSA, discussions are ongoing with Cyrus, the majority holder of the exchangeable bond, to understand the impact of the proposal on the bond, which may include a restructuring of Esken. The company is also undertaking contingency planning, including exploring access to alternative funding to cover its liquidity needs.
Esken believes that a consensual outcome would be in the interests of all parties and will take all reasonable steps to facilitate such an outcome. However, there is no certainty that any of these discussions will lead to a consensual agreement, and the recapitalization proposal could have a material adverse impact on the group.