Jamii Bora Bank sold its Sh412 million Kenya Airways #ticker:KQ loan to rival NIC Bank after sidestepping the national carrier’s debt-to-equity transactions.
The move saw the small lender receive an undisclosed amount of cash from NIC, which raised its exposure to the airline that is known as KQ by its international code.
“Jamii Bora Bank Limited opted to retain their outstanding loan to Kenya Airways Plc after the restructuring in 2017.
“This loan was acquired by NIC Bank Limited in January 2018,” KQ says in its latest annual report.
The loan matures in five years. When Jamii Bora made the loan to KQ, it negotiated for an interest rate of nine per cent.
NIC now holds the debt besides KQ shares that it received to cancel its previous loan of Sh2 billion to the airline.
Most of the banks that lent to the airline have not disclosed the impact of KQ’s share price drop on their holdings of the company’s stock.
The lenders, including Equity #ticker:EQTY and KCB #ticker:KCB, have suffered a combined paper loss of more than Sh8 billion on their KQ shares as the airline’s stock plummeted amid continued losses.
The airline in 2017 issued the lenders with 2.2 billion shares to settle their loans amounting to Sh17 billion.
The shares were acquired at a price of Sh7.78 each but the airline’s stock price has since dropped more than 50 per cent to trade below Sh4, resulting in the lenders’ paper loss.
This means that banks will find it difficult to sell their holdings at a profit, with KQ’s continued losses and wipeout of shareholder funds making a recovery less likely in the medium term.