Kenya Airways unveils new shareholding; KLM stake to drop

KQ B787 aka Dreamliner

Kenya Airways (KQ, Nairobi Jomo Kenyatta) has unveiled details of its proposed revised shareholding structure given creditor banks' decision to commit to a debt-to-equity conversion plan.

At present, the bulk of the Kenyan carrier's equity is in the hands of the country's government with a 29.8% stake followed by KLM Royal Dutch Airlines with 26.7%. The remainder is held by private investors.

However, according to a filing to the Nairobi Stock Exchange lodged on July 16, under the airline's Optimization Plan aimed at reducing its current gross debt from KES242 billion (USD2.3 billion) to KES191 billion (USD1.8 billion), a consortium of eleven creditor banks, collectively the KQ Lenders Co., will convert KES22.5 billion worth of loans to a 35.69% stake.

"Although conversion of debt to equity will mean a large equity capital increase and the issue of new shares to these stakeholders, the effect will be to bolster balance sheet equity and capital structure sustainability with overall shareholder book equity becoming positive when compared to the current negative situation," the filing said.

In tandem with this conversion, Kenya Airways said certain Kenyan banks had also agreed to provide USD175 million via a new multi-purpose facility to allow Kenya Airways to primarily refurbish its aircraft engines.

As previously reported, government, too, will convert a loan of KES25 billion (USD241.5 million) to equity bringing its overall shareholding in Kenya Airways, held through the Cabinet Secretary to the National Treasury, to 46.53%.

For its part, although KLM's shareholding will decline to 13.71%, it has committed to an amended joint-venture agreement which, Kenya Airways says, will "bring enhanced benefits to the company". It has also pledged a further investment in Kenya Airways to the tune of USD76.5 million. This includes KLM's subscription to additional new Ordinary Shares in the carrier via USD26.5 million of in-kind contributions that constitute the London Heathrow slots that Kenya Airways currently leases (and uses) from KLM, as well as IT systems and support investment.

It will also subscribe to a further USD25 million worth of ordinary shares on the pre-completion of Kenya Airways' restructuring or soon thereafter on condition that the African airline has achieved acceptable additional concessions from the leaseholders of B777-300(ER) aircraft as well as its agreeing to maintain staff costs at current levels adjusted for inflation with any other increases subject to commensurate productivity improvements.

Finally, following the completion of Kenya Airways' restructuring, KLM will subscribe to a further tranche of ordinary shares valued at USD25 million. Kenya Airways' remaining existing shareholders are expected to retain a portion of the post-restructured equity.

"The Shareholders will be provided with the ability and opportunity to reinvest in the Company, at an expected discount, and acquire further new Ordinary Shares via the Open Offer, post-Restructuring," it said.

In terms of boardroom control, government will have two seats on the Board in view of its long-term commitment to Kenya Airways, while KLM will be invited to appoint one director. KQ Lenders Co. Ltd shall be entitled to appoint one director for so long as it holds at least a 5% stake. The proposed restructuring will be put to shareholders during an EGM called for August 7.

Source:https://www.ch-aviation.com/portal/news/57924-kenya-airways-unveils-new-shareholding-klm-stake-to-drop