Kenya Airways secures its future with the conclusion of its financial restructuring plan

Kenya Airways PLC has taken another step to securing its long-term growth with the close of its financial and capital optimisation plan.

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The restructuring plan saw all key stakeholders sign their commitment to be part of the airline’s future this week, thus paving way for its continued operational efficiency and financial sustainability.

On 7th August 2017, the restructuring of Kenya Airways gathered momentum when shareholders approved the process at an Extraordinary General Meeting (EGM) held in Nairobi. This allowed as part of the restructuring process a reduction of its debt exposure with about Ksh 50 billion being converted to equity, thus strengthening the airline’s balance sheet.

“The Government continues to support Kenya Airways as it is a valuable national strategic asset. The bolstering of its balance sheet places the airline on a stronger footing and provides a stable base for the long-term, and by extension positively impacting economic growth for the country. I am happy that we have been able to bring other stakeholders together to achieve the financial restructuring,” said Cabinet Secretary, National Treasury, Henry Rotich.

“The support given is in no way a Government bailout. The Government expects a return on its investment, once the airline returns to profitability,” he said.

The financial and capital restructuring process was an intricate one, the first of its kind in this market, which brought together key stakeholders to the table including shareholders, financiers and lessors to agree to secure the airline’s future. It started mid-2016 and had been led by the former CEO and current Advisor to the Board Mr. Mbuvi Ngunze.

The Government played a major role by converting its loans and accrued interest into equity and through the provision of guarantees to key financial stakeholders to enable the success of the plan. The post-restructuring share ownership will see Government holding increase from 29.8% to 48.9%. Local banks, through KQ Lenders Company 2017 Ltd, also converted unsecured debt into equity, resulting in a shareholding of 38.1%. KLM as result of its in-kind contribution will have a shareholding of 7.8% and the balance, of 5.2%, between other shareholders and a new employee share ownership Plan (ESOP).

The company will continue to be listed on the Nairobi Securities Exchange, as well as on the Ugandan and Tanzanian stock exchanges.

Kenya Airways’ Chairman Michael Joseph lauded the restructuring initiative, noting that it was intended to strengthen the airline’s financial capability and make it ready for growth and return to profitability in the highly competitive global and regional aviation environment.

“This process was crucial in securing the airline’s future with a healthy liquidity profile and maintaining a strong and more competitive outlook in its operations, necessary in projecting an attractive airline to strategic partnerships,” he said.

“We are grateful for the support given by the Government, the National Assembly, KLM, local and international lenders, lessors, employees and all the other stakeholders and our advisers who have played a major role in this restructuring,” added the Chairman.

As part of the process, Kenya Airways employees will be able to own part of the organisation through the ESOP, which will be awarded on performance-related contributions to the airline’s future. At the same time, the Board structure will change, with two new Board members representing local banks, and an additional Board representative from the Government of Kenya, while KLM will reduce its representation by one.

An open offer of new shares is intended at a later date to enable shareholders to re-invest in the airline post re-structuring.

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