Kenya Airways has apparently gained approval from its minority shareholders to issue more shares and convert some debt into equity, its reported today, Monday. This is despite some notable opposition from its local investors and lenders.
The troubled carrier reveled in June that a financial restructuring plan would help it cut back on debts, reduce exorbitant finance costs as well as enabling it to stay flying after many years of losses. The airline descended into the red five years ago following a massive downturn in tourism after a spate of attacks by Islamist militants in the country. They have failed to turn a profit since then and the losses were further compounded by the vast loans the airline took on to buy a fleet of new Boeing aircraft
According to the plans, Kenya Airways wants 11 local banks to convert their debt into shares in the company through a special scheme which would then be the second largest shareholder once the restructuring is concluded. For that to happen the debt-ridden airline will need to increase the number of shares to around 7 billion.
However, some local banks had filed a court case objecting to the plan to turn their debt into equity, which may cause more than a few headaches for the Kenya Airways board as to struggle to find a way out of their financial quagmire. "We have been asked not to comment about it (court case), for good reason, but we are optimistic we will have the right approvals to finalise," Mbuvi Ngunze former CEO and now board advise of the airline said today.
The Kenyan government owns 29.8 percent of Kenya Airways while KLM / Air France have a 26.73 percent stake and both approve of the plans.
