Kenya Airways says minority shareholders back restructuring

NAIROBI: Kenya Airways has secured the backing of its minority shareholders to issue more shares and convert some debt into equity, it said on Monday, despite the opposition of some local lenders.

The heavily indebted carrier said in June the financial restructuring plan would help cut debt, reduce finance costs, and help it stay afloat after years of losses.

The airline wants 11 local banks to convert their debt into shares through a special purpose vehicle, which will become the second largest shareholder when the restructuring is completed.

To do this the airline will increase the number of shares in issue from 1.5 billion to 7 billion, board adviser Mbuvi Ngunze told a news conference after a special meeting where small shareholders backed the plan.

But some local banks had filed a court case objecting to the plan to turn their debt into equity, he said.

"We have been asked not to comment about it (court case), for good reason, but we are optimistic we will have the right approvals to finalise," he said.

Ngunze, who was the carrier's chief executive until May this year, said the board would offer smaller investors a chance to buy more shares once the restructuring was completed.

"The idea is to allow shareholders to who are being diluted to buy back into the company and it will be at a discount but the terms and conditions of that offer will be defined," he said.

Bigger shareholders, who backed the restructuring plan before it was announced, will waive their rights to that share offer, he said.

The government has a 29.8 percent stake in Kenya Airways while Air France KLM has a 26.73 percent stake. The airline slumped into the red five years ago following a downturn in tourism after a spate of attacks by Islamist militants.

It has failed to make a pretax profit since then and the losses compounded huge debts the airline took on to buy a fleet of new Boeing aircraft, which pushed it into negative equity.

Its share price rose nearly 10 percent in Monday's session to 4.60 shillings ($0.0443) each.