Kenyan Airways announced Wednesday that it has completed financial restructuring after accruing $2 billion in debt.
The financial restructuring due to be finalized this week is through a series of conversion of some of its debts to equity to help ease cash flow problems with the Kenyan government leading by converting $182 million of its $267 million and amassed interest into 19.1 percent stake, bringing the government’s total stake to 49.8 percent from 29.8 percent.
This would make the government the leading shareholder with Air France-KLM stake dropping to 7.8 percent from 26.7 percent and a host of local banks owning 38.1 percent.
Henry Rotich, Kenya’s finance minister, said other shareholders, who previously owned 43.5 percent of the carrier, will be dipped low to 5.2 percent while insisting that the deal was not a bailout.
“The government expects a return on its investment once the company returns to profitability,” Rotich futher said
Mbuvi Ngunze, CEO Kenyan Airways, while referring to the debt, said: “We will pay less now to allow us a bit of time to reshape the business to pay a bit more on the tail end.”
Rotich explained that the government did not want its stake to exceed 50% but that a deal was crucial to ensure the carrier’s survival.
“Kenya Airways is a strategic national asset and plays an important role in the economy,” he pointed out, adding: “Letting it go was not an option.”
Also, as part of its assistance to the company’s revival efforts, the government also offered contingent guarantees for $750 million of the airline’s debt for 10 years. However, the financial restructuring diluted all existing shareholders by 95 percent.
The carrier had earlier posted the country’s biggest ever annual corporate loss of 26 billion shillings ($251 million) in its 2016 financial year, pushing it into negative equity after being hit by a slump in travel and high financing costs after buying new Boeing planes.
Frontpage February 9, 2018