KQ rights issue yet to get approval from Kampala and Dar
Posted Sunday, March 18 2012 at 20:08
Ugandan and Tanzanian capital markets regulators are yet to give approval for the Kenya Airways rights issue, even as the register for investors who want to participate in the airline’s rights issue closes this Monday.
The lead sponsoring brokers in Uganda and Tanzania, Crested Stocks Securities and Orbit Securities, told the Business Daily that they were expecting the regulators in both countries to approve the Sh20.7 billion issue this week.
The delay in approval is, however, not expected to affect the largest cash call so far in East Africa’s capital markets history.
The only requirement that investors who want to participate must meet for now is to buy the shares by the end of trading on Monday.
“What I can tell you is that it is moving through the approval process,” said Robert Baldwin, chief executive officer Crested Stocks in Uganda, who added that he could not divulge any more information on the rights issue.
All investors who will have bought shares by the end of trading today will be able to purchase 16 new shares for every five that they own from April 2 at a discounted price of Sh14.
“They are yet to receive approval but by mid next week they should get it,” said Orbit Securities Company chief executive, Laurean Malauri last week.
Majority of the airlines’ investors are Kenyan, and their full participation would be enough to make the offer a success.
The airline is seeking to raise Sh20.68 billion through the sale of 1.477 billion additional shares, which are expected to start trading at the Nairobi, Dar es Salaam and Kampala bourses on June 12.
“We are expecting that those in Uganda and Tanzania will get approval next week,” said Standard Investment Bank executive chairman, James Wangunyu. On Friday the share closed at an average price of Sh15.15 at the Nairobi Securities Exchange (NSE), after steadily declining from its average closing price of Sh18.60 on the previous Friday before details of the offer were made public.
Analysts had started questioning whether the share price would fall before the rights issue offer price, a move that would make it more attractive to buy the shares on the bourse.
On Thursday evening, Sterling Capital said that demand on that day remained weak, with bids coming in as low as Sh13.60.
“Further depreciation in the price, will make it hard for the underwriter to sell the denounced rights as the market will most likely be looking for a discount on the new shares,” said Sterling Capital in its research note. Mr Wanguyu said that Standard Investment Bank did not expect the share price to drop further, adding that the counter was already “undervalued.”
The airline is offering the rights at discount of 32.2 per cent on a volume weighted average price over the previous 90 days from February 29 this year. Mr Wangunyu said that interest for the stock was high, particularly from institutional investors.
Kenya Airways’ majority shareholders — KLM with 26 per cent and the Kenyan government holding 23 per cent — have already given assurance of their participation effectively meaning the company is seeking an extra Sh10.55 billion from the three East African stock markets.