Kenya Airways is finalising the deal to convert its Sh50.2 billion debt into equity as part of its financial recovery plan.
Speaking to journalists on Thursday last week, KQ chairman Michael Joseph said big progress has been made and that the deal will be announced soon.
He hinted that the arrangement would see the government increase its stake in the airline to 46.5 per cent, up from the current 29.8 per cent, while 11 banks will replace KLM as second largest shareholders at 35.7 per cent.
Although he declined to provide further information, saying that the deal was tied to a court case, a source privy to the negotiations told the Star the deal got an affirmative vote from directors who hold 75 per cent of unsecured debt and is already filed by the court for approval as per the Companies Act.
The source further revealed that the airline was negotiating with creditors to slash their interest, with claims that some of them hiked interest rates.
In July, Equity Bank, Jamii Bora and Ecobank, who are owed by the airline Sh5.2 billion, Sh412 million and Sh824 million respectively, moved to court to stop the deal, claiming they had not been consulted enough.
Both the High Court and the Court of Appeal have since dismissed the case, with the latter giving KQ a nod to proceed with the debt conversion plan.
The 11 banks, which include Equity, National, Co-operative, CBA, NIC, DTB, KCB, Chase, Jamii, Ecobank and I &M, are jointly owed Sh22.8 billion.
The National Treasury, besides holding a 29.8 per cent stake in the national carrier, is owed Sh27.2 billion in debt.
Although new KQ chief executive officer Sebastian Mikosz stayed away from the topic while addressing media for the first time since his appointment in June 1, financial restructuring will be among his first major assignment even as he plans to reclaim the airline’s past glory.
The proposed restructuring will see Kenya Airway’s long-time partner KLM cut its second largest stake from the current 26.7 per cent to 13.7 per cent.
The airline’s employees will convert their accumulated bonus into shares, getting a 1.9 per cent stake in the national carrier as a result.