Kenya Government Raises Stake In Kenya Airways, Restructuring In Final Stages

The Kenyan government and domestic lenders have agreed to convert more than $400 million of Kenya Airways’ debt into equity, increasing the state’s stake in the airline to almost 50%.

The airline is undergoing a $700 million financial restructuring aimed at reducing its debts and returning to profitability after posting heavy losses, including Kenya’s biggest annual corporate loss of KES 26 billion ($251 million) in the financial year 2016.

The government is converting more than $200 million of shilling and dollar-denominated loans, the airline said in a statement on Monday to the Nairobi Securities Exchange.

The agreement will increase the government’s stake from 29.8% to 48.9%. Air France-KLM has a 26.7% stake in the airline.

The deal gives 11 local banks a 38.1% stake, which will be held in a special purpose vehicle called KQ Lenders Co. Both the government and the lenders still have outstanding portions of debt to be converted at a later date, they said.

KQ share price (Source; Financial Times)

By close of the day’s trading on the Nairobi Securities Exchange, the company’s share price was down 1.77% at KES 5.55. The counter recorded a turnover of KES 1.68 million from 301,000 shares traded.

Restructuring to conclude this week

The financial restructuring of Kenya Airways through a conversion of some debt into equity and the provision of some guarantees by the government will be completed this week, the finance minister said.

Henry Rotich said the government’s participation in the deal did not amount to a bail-out, adding that it expected a return once the loss-making carrier is back on its feet.