Tuesday, January 9, 2024

Carlyle Jacks Up Another Infrastructure Investment

The Carlyle Group is suing to stop the sale of London's Southend Airport.

Carlyle Group has accused the regional airport of breaching an agreement.

Carlyle's 2021 investment in London's Southend Airport was characterized as:

“The combination of the proven operational capability of the LSA management along with the airport development experience of CGI (Carlyle Global Infrastructure) and its financial strength will provide a strong platform as we rebuild our commercial relationships with our airline and other partners into the recovery.”

Carlyle provided a £125mln loan facility convertible into 30% of shares in London Southend Airport Company Ltd.

"CGI represents a true strategic development partner that will enable us to realise the full potential of LSA. Carlyle is a global investment firm with US$260bn under management,” said David Shearer, executive chairman at Esken.

This is the latest infrastructure deal Carlyle has blown up.  London's Southend Airport follows Carlyle's abandonment of its lead development role for the Harbor Island expansion at the Port of Corpus Christie.   

Carlyle is seeking early repayment of the London Southend Airport loan (before the current deadline of 2028).  

The Brintons' family recalls how Carlyle used such a tactic to take over their company.  

“It was taken from under our feet without our consent.”

Private credit is the rage but borrower should be aware that your PEU creditor may take your firm via a debt cramdown.  Financial barbarians don't always come through the front door.

Carlyle CEO Harvey Schwartz said in October:

"I think the year ahead will certainly present incredible alpha opportunities. But generally speaking I think we’ll have more of a headwind than a tailwind."
The amount owed to Carlyle stands at £193.7m.  In two and a half years the loan grew by £68.7m?  That's a significant headwind.

Update 2-21-24:  Creditors Carlyle Group and Cyrus look likely to take over Southend Airport.  The legal battle may have a few more chess moves.  Picking up a British asset at a knockdown price reminds me of Brintons'.

Update 3-7-24:  The people at Southend are trying to understand what happened as Carlyle's debt cramdown is executed.