Kenya Airways to Repay Loans in Form of Shares to 11 Lenders

By Amina Faki

A day after the Treasury announcement that it would convert its 25 billion shillings National Carrier Kenya Airways loans into shares, eleven banks in Kenya are set to convert 23 billion shillings in KQ loans into shares.

The eleven Kenyan banks in the deal are; Equity Bank, Kenya Commercial Bank Group, Commercial Bank of Africa, Co-operative Bank, Jamii Bora, I&M, NIC Bank, Eco Bank, Chase Bank, National Bank and Diamond Trust Bank.

James Macharia, the Transport Secretary said that the eleven banks will move to equity. He added that they can recover their debts in form of shares by selling them on the stock exchange.

Treasury Secretary Henry Rotich on 7^th May drafted the deal which allows the banks to freely sell their shares on the open market over the next decade which was later presented by Aden Duale, the National Assembly Majority Leader in a seasonal paper before recess on Thursday.

According to an article in the Business Daily, Kenya Airways has reported net losses five years in a row with its net loss for the 12 months ended March by 60.9 percent to 10.2 billion shillings.

In the case that Kenya Airway’s share price wouldn’t have increased significantly to cover the debts by the year 2027, the government has guaranteed to step in and pay the banks a sum of 7.7 billion shillings.

The restructuring plan is trying to prevent liquidation, and in the event that it happens, the Treasury will pay 28.8 billion shillings to the bank. This won’t turn up well for the taxpayers and the economy as a whole.

Mr. Rotich wrote in the seasonal paper that the financial restructuring option creates incentives to ensure that all the relevant stakeholders of the company contribute to achieving beneficial outcome. He continued by saying that it is inter-conditional on every one of them agreeing to the restructure. The guarantees avoid any cash bailout and consequential from all stakeholders to receive cash.

Kenya Airways is suffocating with loans worth 77.3 billion shillings to the 11 lenders. This has greatly contributed to it posting losses for five consecutive years.