National carrier Kenya Airways has found new owners following a major financial restructuring.
Under the Optimisation Plan, the Government tops the national carrier’s shareholding followed by KQ Lenders Company Ltd while KLM drops to third position in ownership.
KQ Lenders Company, which comprises 11 banks that converted their loans into equity, will control 35.69 per cent shareholding of the national carrier, with an allocation of 10.7 billion shares. KLM will see its shareholding fall from 26.73 per cent to 13.71 per cent, while the State’s stake in the cash-strapped airline has inreased from 29.8 per cent to 46.53 per cent.
The Government, through the National Treasury Cabinet Secretary, will be allocated 13.9 billion shares.
“In addition, KLM and KQ will be amending their long-standing joint venture agreement to further enhance the benefits to the company. Under the proposed cooperation agreement, the shareholders agreement entered into between the Government and KLM at the time of KLM’s initial investment in the company in 1995 will be terminated,” said the airline in a circular signed by the board’s chairman, Micheal Joseph.
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KLM is also expected to contribute cash and in-kind capital in the latest debt restructuring plan.
It is reported that the Dutch carrier has provided some ‘systems’ to KQ as part of the agreement to contribute in kind.
The sweeping changes are set to be approved by shareholders in an extraordinary general meeting to be held on August 7, a day before Kenya’s General Election.
If the plan sails through, it will mark the final phase of KQ’s restructuring strategy, which is widely expected to return it to profitability.
The agreement has been deposited with the Capital Markets Authority, as Kenya Airways is listed at the Nairobi Securities Exchange.
The 11 banks agreed to convert into equity a debt of Sh22.5 billion as part of KQ’s plan to reduce its current gross debt from Sh242 billion to Sh191 billion. The Government will also convert its debt of Sh23.8 billion (plus accrued interest) into equity even as it guarantees a Sh54.1 billion loan from the Exim Bank of the United States.
‘Certain Kenyan banks’ will also provide a loan of a loan of Sh17.5 billion via a new multi-purpose vehicle to improve the company’s cash flows.
However, the current structure might change when the banks liquidate their shareholding.
The banks, according to some reports, include Equity Bank, KCB Group, Commercial Bank of Africa, and Cooperative Bank. The others are Jamii Bora, I&M Bank, NIC Bank and Ecobank, Chase Bank, National Bank, and Diamond Trust Bank.
Through the programme, the embattled airline hopes to reduce its current debt exposure by Sh51 billion to Sh242 billion in a bid to return to profitability.
It hopes to make an operating profit of Sh900 million in the 2016/17 financial year from an operating loss of Sh4.4 billion in the 2015/16 financial year.
The restructuring will also see minority shareholding significantly diluted.
“On implementation of the debt restructuring and the employee offer, existing shareholders will be diluted by 95 per cent,” read the circular.
However, shareholders will be offered an opportunity to re-invest in the company through an open offer.
“KQ Lenders Co Ltd is a Kenyan company owned by a ‘purpose’ trust, the trustee of which is Minerva Fiduciary Services (Mauritius) Limited, which is part of MTC Trust Services.
“As such, there is no beneficial owner of the shares in KQ Lenders Co Ltd. Purpose trusts are widely used internationally for corporate restructuring transactions,” says the circular.