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 Ksh50 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.
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.