By Judith Akolo
A group of banks who advanced loans to Kenya Airways (KQ) have agreed to convert the debt into a stake in a deal that will see them the second highest shareholder of the national carrier.
The 11 banks will have a 35.7 percent stake if shareholders approve the restructuring plan during the Extraordinary General Meeting slated for 7th of next month.
The government will also convert its debt into stake pushing its shareholding to 46.5 percent while KLM will have its stake reduce to 13.7 percent.
The airline currently owes 11 commercial banks in excess of 22.8 billion shillings.
It has prepared a recovery plan that will see the banks form a special purpose vehicle the KQ Lenders Company Limited and convert the debt into equity.
This is subject to approval by Kenya Airways shareholders during the Extraordinary General Meeting slated for 7th of next month.
KLM as a shareholder will drop to third place owning 13.71 in the new arrangement from the current 26.73 percent.
New shareholders together with the banks are KQ Employees who will own 1.9% stake in the lucrative airline that has been tottering on the brink of collapse.
The new shareholding structure was prepared by a team of consultants including; the restructuring adviser PTJ Partners, an international counsel White & Case, Local legal advisers Coulson Harney and Deloitte as the independent financial adviser.
The new arrangement is expected to give KQ a cash-flow relief of 37 billion shillings over a five years period, reduce the gross debt exposure including the debt on aircrafts, that owed to the banks and government as well as future lease payments by between 51 billion shillings and 191 billion shillings.
It will also leave KQ with a positive equity position of 8.9 billion shillings from the current 44.9 billion shillings.
Kenya Airways received the government support to the restructuring efforts last month.
The Cabinet approved plans to convert the government loans into equity, and provision of contingent guarantees subject to parliamentary approval in exchange for material concessions to be provided as part of the financial restructuring.