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KQ shareholders endorse restructuring strategy

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Kenya Airways has received a major boost after shareholders backed its restructuring plan aimed at, among others, pulling it out of a debt hole.

The shareholders approved the plan at an extra-ordinary general meeting at its Pride Centre headquarters in Nairobi today.

The airline is eyeing to raise Ksh 1.5 billion from the shareholders, excluding the Government, KLM and KQ Lenders Co. Ltd, through issuance of new ordinary shares through an open offer when the restructuring is completed. The latter trio will not take part in the open offer.

The financial restructuring kicked off in earnest on July 14 when the company signed an agreement with the government, KLM and eight Kenyan banks.

Earlier, the National Assembly had endorsed State guarantees to pay KQ’s long-term loans totalling Ksh 77.3 billion (US$750 million) in the event of default.

The National Treasury then agreed to inject Ksh 27.3 billion after converting the airline’s debt into equity.

Under the programme, Treasury, which owns 29.8% of KQ, increased its stake to about 40, with KLM expected to inject about Ksh 10.4 billion (US$100) million to defend and possibly shore up its present 26.7% shareholding.

Through the KQ Lenders Co. Ltd, the banks also agreed to convert Sh22.7 billion loans into debt backed up by issuance of new ordinary shares.

The aim is to reduce KQ’s current Sh242 billion gross debt exposure by about Ksh 50 billion.

In addition, there will be a cash flow relief of about Sh37.1 billion from restructuring the timing and form of the amounts due to operating and finance lessors in respect of the airline’s fleet of aircraft, a circular sent to the shareholders says.

There will also be provision of up to Ksh7.9 billion of cash and in-kind contributions from KLM and an arrangement of approximately Ksh18 billion of financing facilities from a number of KQ’s existing bank partners.

ALSO SEE: GoK finds a creative way to rescue ailing Kenya Airways

KQ chairman Michael Joseph said they are looking into making flights more affordable for customers who fly with the national career.

The new CEO Sebastian Mikosz told shareholders how he helped turn around LOT, a  Polish airline, twice, adding that his family is expected to follow him to Kenya, arriving in the country next week.

Joseph said the turnaround strategy that kicked in in March this year is already bearing fruits.

“We’re meeting our budget, we’re also seeing an upward trajectory and there’s a lot of positive to come,” he told the shareholders.

“We’re flying 10,000 to 12,000 people a day. Only 1,000 are on canceled or delayed flights, which is quite normal,” Sebastian said during a question-and-answer session.

Under the restructuring plan, the National Treasury and KLM will continue as KQ’s strategic partners.

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Firms partner to offer financed solar solutions

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Businesses looking to purchase solar can now benefit simultaneously from the market leading competencies that both companies bring to the table.

Two energy firms have agreed to join forces to offer financed solar solutions to a select portfolio of commercial and industrial customers operating in Africa.

The move by Solar specialists Solarcentury and Energy investors CrossBoundary Energy means businesses looking to purchase solar can now benefit simultaneously from the market leading competencies that both companies bring to the table.

The firms say Solarcentury’s understanding of the technical challenges in integrating solar with an operating business and CrossBoundary’s experience of financing businesses operating in fast changing circumstances are set deliver a market ready viable solar solution to businesses in the region.

Dr Daniel Davies, Africa Director for Solarcentury commented: “Solarcentury have been at the forefront of designing and building commercial scale solar PV plants in Sub-Saharan Africa. We have built the majority of Commercial and Industrial Solar PV plants in East Africa and we have seen businesses make considerable savings from day 1 of energising the PV plant. We now bring our substantial technical expertise and in partnership with CrossBoundary Energy, are able to provide a unique financing offer for any business in Africa.”

ALSO SEE: Micro-finance partnership to enhance access to solar energy

Matt Tilleard, Managing Partner at CrossBoundary Energy explained that ‘Our objective at CrossBoundary Energy is to provide financing to the best solar developers in Africa who are serving corporate customers, so we’re excited to be working with Solarcentury to bring African businesses cheaper and cleaner power’.

He added that businesses are the major consumers of electricity in most African markets and by providing them cheaper power through a solar PPA they can actually save them money from day one while also reducing their carbon emissions.

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Nakumatt warehouse taken over unpaid taxes

URA’s decision is set to exacerbate Nakumatt’s troubles with other creditors who are already short on patience.

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The revenue agency later took over the retail chain’s three stores in Kampala as part of the revenue recovery effort.

The Uganda Revenue Authority (URA) has taken control of Nakumatt Supermarkets main warehouse, seeking to recover $86,000 (Sh8.6 million) in unpaid taxes. Officials descended on Nakumatt’s Kampala-based warehouse, which is also the retail chain’s headquarters in Uganda, on Wednesday taking control of distribution of goods to its five stores.

The revenue agency later took over the retail chain’s three stores in Kampala as part of the revenue recovery effort. “The URA has sent several tax demands to Nakumatt in recent months with no success. Their officers have now moved in seeking to recover the outstanding amount,” a source familiar with the matter told the Business Daily.

URA said its action means it will appropriate all the income Nakumatt makes from the five outlets until the tax arrears are cleared. The unprecedented administrative action also saw the URA seize several Nakumatt trucks that had recently made deliveries to the Kampala warehouse from Kenya.

Doris Akol, the URA commissioner-general, declined to comment on the matter while Atul Shah, Nakumatt’s managing director, did not pick our calls or respond to text messages.

SEE ALSO: Nakumatt seeks courts protection as debt piles

Nakumatt, which is facing a crisis due to a mountain of debt and delays in securing an investor, has since the year closed several stores in Uganda and Kenya.  In Uganda, aggrieved suppliers and landlords have sued the retail chain seeking to recover about Sh515 million in unpaid invoices and rent arrears.

Uganda’s minster for veterans, Bright Rwamirama, in mid-June took Nakumatt to court seeking to be paid Sh58.6 million in rent arrears he, and other partners, are claiming from the retailer for use of their premises in Mbarara.

Nakumatt was expecting a six-week phased injection of Sh7.7 billion from an unnamed private equity fund beginning March.

 Knight Frank Uganda, the property manager of the Acacia Mall, Village Mall and Victoria Mall, where Nakumatt was a tenant, took over their space on June 28, saying the retailer was “not adding much value to the three shopping malls.”

The URA’s decision to take control of the retailer’s Ugandan operations, and give itself first priority on all income, is set to exacerbate Nakumatt’s troubles with other creditors who are already short on patience.

READ: Factory that turns maize cobs into gold

Nakumatt was expecting a six-week phased injection of Sh7.7 billion from an unnamed private equity fund beginning March.

Failure to secure the funding has caused widespread product stockouts and seen it delay employees’ pay, prompting demonstrations and court action from the financially-strained workers.

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Business News

Java to open Sh50m outlet in Machakos

New restaurant expected open in time for December holidays after Kericho and Eldoret branches, with a target of 8 new outlets by year-end.

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Group Chief Executive Officer Ken Kuguru says the expansion is in line with the corporate ambition to grow its national and regional footprint.

Java House has announced plans to set up an outlet in Machakos County, its latest branch outside Kenya’s capital, Nairobi. The outlet will be located at Crystal Rivers Mall and Residences in Athi River, bringing the total number of branches to 56.

Group Chief Executive Officer Ken Kuguru said the expansion is in line with the corporate ambition to grow its national and regional footprint.

Athi River and the wider Machakos County has a burgeoning residential and working population, Mr Kuguru said, adding that that the firm had already signed an agreement with Safaricom Staff Pension Scheme (SSPS), the developers of Crystal Rivers Mall and Residences to invest about Ksh 5o million in its new outlet that will occupy 2,800 square feet.

“We found Crystal Rivers to be a very strategic location for our new restaurant,” he said, “ideally positioned between Nairobi and Machakos, along Mombasa Road and right next to a rapidly expanding residential and commercial area.”

He said Java had sets its eyes on the emerging market which, while already positioned as a weekend outing destination, offered limited choices in Kitengela town. Java be seeking to plug the existing gap in the variety of restaurant offerings in the region.

RELATED: Kenyans drinking too much coffee? 

“Java will fit neatly into the Crystal Rivers Mall whose positioning is nearly similar as a family entertainment and fun destination,” said Mr Kuguru.

The new Java restaurant is expected open before December holidays just after Kericho and Eldoret branches, with a target of opening eight outlets by yearend.

Pension Secretary Richard Gitahi said Safaricom Staff Pension Scheme (SSPS) was keen to get the ‘Tenancy Mix’ correct at Crystal Rivers Mall, which has been positioned as a lifestyle mall, with unique wholesome offers for everyone – Dad, Mum and Kids as well as the business community.

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