KENYA AIRWAYS RESTRUCTURES TO KEEP FLYING

Struggling under the weight of 242 bn Kes ($2.3bn) Kenya Airways, one of the companies quoted on the Nairobi Securities Exchange, has opted for enviable moves to restructure its capital to continue flying.

According to the company chairman, Michael Joseph, major shareholders in the company and creditors have all agreed to a plan, aptly called 'Optimisation plan' has been set in motion to reduce the debts, access new funds and even reduce the number of shares that can expect to receive dividends in the future.

The debt is to be reduced by about Kes 51bn ($486m); major flow outflow relief is to be got from lessors of aircraft fleet and creditor banks are to inject new multipurpose $175m credit facility to enable the company meet immediate financial obligations.

The key to the success of the plan lies with two major shareholders: The government of Kenya and KLM Royal Dutch Airlines and some creditor banks.

Under the plan, government of Kenya's $238m loan plus outstanding interests are to be converted into ordinary shares while the same government will also provide contingent guarantees to banks that will extend $750m new credit.

On the other hand, some of the creditor banks have agreed to the conversion of their $221m loans into equity as well.

KLM will in turn bring more cash or in kind capital and alongside the government, remain the major shareholders of Kenya Airways.

Finally, lessors of fleet to the airline are help provide the company cash flow relief of about $360m through restructuring of timing and form of payment for leases for up to five years hence.

Technically, with these major already in agreement, the plan looks set to go and the extraordinary general meeting of shareholders billed for KQ Pride Centre Nairobi, seems to be a formally to do it all according to all rules and law.

However, from the notice of the meeting sent out to shareholders dated yesterday, July 16, shareholders are in for some real making.

They are to pass resolutions splitting the current Kes 5 ordinary share they hold into one part with nominal value Kes 0.25 per share called 'interim share' and the rest part termed 'deferred shares'.

The interesting thing is that deferred shares will loose all rights including right to partake in profit in future, right to notices, right to share certificate and only confers right to return on capital on winding up of the company.

Besides, resolutions will have to be passed empowering the company to repurchase deferred shares by lucky dip or cancellation.

The notice was signed by company Secretary Catherine Musakali.

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