The Kenya government in conjunction with domestic lenders have agreed to convert Kenya Airways debt into equity giving it a controlling stake in the airline.
The deal will see the Kenyan government and domestic lenders convert more than $400 million of the airline’s debt into equity, giving the government a controlling stake in the airliner.The agreement will increase the government’s stake from 29.8% to 48.9%. Air France-KLM holds a 26.7% stake in the airline.
According to a statement issued to the Nairobi stock exchange, the government has given Kenya Airways more than $200 million of Kenyan shilling and dollar-dominated loans.
“The government of Kenya shall acquire effective control in Kenya Airways and it shall make an application to the Capital Markets Authority for exemption from the take-over requirements in compliance with the Take-overs regulations,” Treasury Secretary Henry Rotich said.
In addition to the acquisition of equity under the debt conversion and subscription agreement, the government and Kenya Airways have entered into a zero coupon ordinary mandatorily convertible loan agreement in relation to settlement of remaining portion of the government loans.
The deal also gives 11 local banks a 38.1% stake, which will be held in a special purpose vehicle called KQ Lenders Co.