Since the financial restructuring of Kenya Airways #ticker:KQ and the listing of its new shares on the Nairobi Securities Exchange (NSE) on November 29, 2017, there have been many questions, much confusion and a fair amount of euphoria regarding the trading of KQ shares on the NSE.
It is common knowledge that the airline was facing financial distress prior to the restructuring. The company therefore opted to renegotiate and reduce its debt by giving its creditors a large equity stake in the airline.
This in order to reduce the airline’s debt burden and to continue the airline’s operations. This process significantly affected the overall shareholding structure of the company.
As a result of converting a large amount of debt to equity, KQ issued a large amount of new shares which resulted in significant dilution to existing shareholders, meaning the old shareholders now own a smaller piece of a much healthier company.