Kenyan government,banks to control 87 per cent of national airline in debt swap deal

The shares will be owned by a new special purpose vehicle called KQ Lenders Company

The Kenyan government and domestic lenders have agreed to convert loans of Sh44.2 billion ($426 million) to equity which will see them control 87 per cent of national carrier Kenya Airways.

The government, which has given Kenya Airways shilling loans totaling Sh24.6 billion ($238.1 million), will under the airline's debt restructuring plan increase its stake to 48.9 percent from 29.8 percent.

“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,” Treasury Secretary Henry Rotich said on Monday.

The ten banks will on the other hand acquire a 38.1 percent stake following a conversion of the Sh17.3 billion ($167.24 million) of the Sh22.5 billion ($217.2 million) 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.

Both the Treasury and the banks have also applied to the Capital markets Authority (CMA) for exemption from a requirement to make a takeover offer for the airline, on the grounds that the restructuring is on the basis of rescuing a firm in financial distress in the interest of the public.

Kenya Airways, in which Air France-KLM has a 26.7 percent stake, announced a $690-million reorganization last year aimed at returning the company to profit. The carrier posted a 26.2 billion-shilling ($253 million) loss in 2016 -- the biggest in Kenyan corporate history.

Since the plan was announced, the airline cut jobs, reduced the size of its fleet and canceled unprofitable routes.

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