The Kenya Airways #ticker:KQ open offer to retail investors to allow them reduce their dilution occasioned by debt to equity swaps by major creditors will now take place early next year and not by the end of next month.
Mbuvi Ngunze, former KQ chief executive, said it was initially expected that the restructuring transaction would be concluded by September but negotiations, which included pacifying three dissenting local banks, delayed it.
The Treasury and 10 local banks on Tuesday night signed off on the conversion of their combined Sh44.2 billion debt into shares, diluting existing shareholders’ stakes by around 95 per cent.
To minimise this extreme dilutive effect, KQ’s retail shareholders — excluding, government, the local banks and KLM — are set to participate in an open offer (of about Sh1.5 billion) initially expected to happen this year.
“We were hoping to have closed the restructuring deal late August. That did not happen and as a consequence, it will slip into next year,” Mr Mbuvi, KQ’s financial adviser, told the Business Daily.
“The board will now decide the new timing, of course subject to regulatory approval, but I think we should see the open offer fall sometime within the first quarter of 2018.”
The Treasury converted a Sh27 billion loan into equity, effectively pushing its shareholding from 29.8 per cent to 48.9 per cent.
KLM, which until this deal KQ’s second largest shareholder with a 26.2 per cent stake, has also been diluted massively down to 7.8 per cent, despite committing Sh2.7 billion in in-kind contributions.
The Dutch carrier could however, in future, raise its KQ shareholding to 13 per cent if it decides to invest a further Sh5.1 billion in the national carrier, subject to certain conditions such as KQ maintaining its wage bill at current levels.
As at March 2016, KQ had 79,753 shareholders on its books. Excluding the Treasury, KLM and the 10 Kenyan banks, these shareholders in addition to those who join a new employee share ownership plan, will retain a 5.2 per cent stake in the airline.
“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,” said Treasury secretary Henry Rotich.