Kenya Airways (KQ, Nairobi Jomo Kenyatta) is to secure some debt relief, with the Kenyan government agreeing to a debt-to-equity swap as part of a capital restructure plan. The airline announced that the Cabinet has approved the measure, and it will now go before the National Assembly.
In supporting the measure, Treasury Cabinet Secretary Henry Rotich said that Kenya Airways is a valuable national strategic asset. "As a major shareholder, we are keen to secure the airline's future and ensure it has a healthy liquidity profile and remains operational," said Rotich. "The proposed restructuring of the airline will generate concessions from all stakeholders and the re-capitalisation of the business."
The support package will include conversion of government loans into equity and the provision of guarantees to the airline's lessors of up to KES77 billion (USD745.4 million), Bloomberg reports.
The swap may mean the state will increase its share from 29.8% to over 50%.
"If we convert the loans that we have, probably it may be over 50% or so, but that decision is yet to happen. If everything turns around we will just retain our shareholding as it is," Rotich said.
Kenya Airways Chairman, Michael Joseph, was full of praise for the government's support, and believes the healthier liquidity position will greatly assist the airline as it attempts to recover from four crushing years of losses.
"Already we have seen our operating profit improving and reduced our costs and losses," Joseph said. "With a healthier liquidity, and at no cash cost to the Government, the airline will be in a better place to continue with its operations serving Kenya and the region at large."
