Eleven banks to own 38.1pc stake in Kenya Airways

Eleven local banks are set to be the second largest shareholders of national carrier Kenya Airways after forming a special purpose vehicle to acquire shares in the airline.

As part of a bold restructuring plan, the banks will convert part of loans issued to Kenya Airways to acquire a 38.1 percent stake.

This follows a deal proposed by the airline that will see the banks convert $167.24 million (Sh17.3 billion) of the $217.2 million (Sh22.5 billion) in loans issued to the airline.

The shares will be owned by a new special purpose vehicle called KQ Lenders Company managed by Minerva Fiduciary Services from Mauritius.

The local banks in the debt conversion deal include KCB Group, Commercial Bank of Africa, Co-operative Bank and Equity.

Other banks include I&M Bank, Jamii Bora, NIC Bank, Ecobank, National Bank, Diamond Trust Bank and Chase Bank.

As part of the deal the banks will sign a new loan agreement for the outstanding loan amount of $50 million to acquire more shares in 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 in the dailies.

Kenya Airways has been under huge financial strain over the years, reporting losses for five consecutive years.

The airline shrunk is full year to March loss by 60 percent to Sh10.2 billion with the debt restructuring plan expected to give it financial headroom to bounce back.

The government will also acquire an additional 19.1 percent shareholding in Kenya Airways, pushing its total shareholding to 48.9 percent as part of restructuring of government loans advanced to the airline

The treasury had issued two loans to Kenya Airways worth Sh4.2 billion and $197.2 million (Sh20.4 billion) respectively.

Both the lenders and the government have applied for an exemption from a Capital Markets Authority (CMA) requirement to make a takeover offer.

Transport Cabinet Secretary James Macharia is set to issue further details of the deal.