The Government of Kenya along with domestic lenders have come to Kenya Airways’ aid after agreeing to convert the airline’s $405.3 debts into equity.
According to reports, the government will now have a controlling 48.9 percent stake in the company. This comes after the state agreed to give the airline $238.1 million.
“The effect of the debt conversion and subscription agreement is the acquisition by government of an additional 19.1 percent of the ordinary voting shares in the capital of KQ resulting in the increase of shareholding from 29.8 percent to 48.9 percent of the ordinary voting shares,” reads an order by CS Henry Rotich in part.
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“The government of Kenya shall acquire effective control in Kenya Airways and it shall make an application to the Capital Markets Authority for exemption from the take-over requirements in compliance with the Take-overs regulations,” the CS added.
The agreement also grants 11 domestic banks 38.1 percent stake will be held in a company known as KQ Lenders CO.
As part of the agreement KQ will also sign a deal with the banks over the remaining $50 million which will allow them to receive more shares in the future.
“The effect of the mandatorily convertible loan agreement is the issuance of ordinary shares to the KQ Lenders Co at a future date in accordance with terms of the agreement,” Kenya Airways said in notice.
The move comes at a time when the company plans on restructuring with the hopes of recovering from years of financial set backs.
The national carrier has suffered loses for the past five years but recorded an operating profit of Ks897m in 2016.
The carrier’s financing costs were nine times more than the recorded profit.
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