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% stake, citizen.co.ke reports.
This follows a deal proposed by the airline that will see the banks convert Ksh 17.3 billion (US$167.24 million) of the Ksh 22.5 billion (US$217.2 million) in loans issued to the airline.
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.
The airline shrunk is full year to March loss by 60% to Ksh 10.2 billion with the debt restructuring plan expected to give it financial headroom to bounce back.
The government will also acquire an additional 19.1% shareholding in Kenya Airways, pushing its total shareholding to 48.9% as part of restructuring of government loans advanced to the airline.
The National Treasury had issued two loans to Kenya Airways worth Sh4.2 billion and Ksh 20.4 billion (US$197.2 million) respectively.
Rotich and Transport Cabinet Secretary James Macharia is set to issue further details of the deal.