National carrier Kenya Airways has a new management team following a major financial shake-up.
The government is the major shareholder, followed by KQ Lenders Co. Ltd., and then KLM comes at third according to the Optimization Plan.
The government increased its shares to 46.53% in the KQ shareholding with 13.9 billion shares. KQ Lenders (comprising of 11 banks) chose to convert their loans into equity, and will now control 35.69% shareholding of KQ, with an allocation of 10.7 billion shares. KLM’s shareholding has dropped down to 13.71% from its initial 26.73%.
Micheal Joseph, the airline’s board chairperson said, “In addition, KLM and KQ will be amending their long-standing joint venture agreement to further enhance the benefits to the company. Under the proposed cooperation agreement, the shareholders agreement entered into between the Government and KLM at the time of KLM’s initial investment in the company in 1995 will be terminated.”
The changes await approval from shareholders in a special general meeting to be held on the 8th of August, a day just before the elections. If the plan goes through, the reorganization will have reached its final phase, and it is widely expected that the ROI will be profitable.
Certain banks are also expected to provide a loan of Sh. 17.5 billion through a new multi-purpose vehicle to help improve KQ’s cash flows.
If these banks, however, liquidate their shareholding, the structure may change. According to some reports, some of these banks include: Equity Bank, KCB Group, Commercial Bank of Africa, Cooperative Bank, Jamii Bora, I&M Bank, NIC Bank and Ecobank, Chase Bank, National Bank, and Diamond Trust Bank.
The plan hopes to reduce KQ’s current debt by Sh51 billion to Sh242 billion in a bid to return profitability. It aims at making an operating profit of Sh900 million in the 2016/17 financial year from an operating loss of Sh4.4 billion in the financial year 2015/16.