Nairobi, KENYA: Kenya Airways has conducted a major financial restructuring that will see 11 commercial banks it owes Sh 22.8 billion jointly replace Dutch airline KLM as the second largest shareholder.
In a circular sent to shareholders ahead of a general meeting set for August 7th, the Government tops the national carrier’s(popularly known as KQ) shareholding; followed by KQ Lenders Company Ltd while KLM drops to third position in ownership.
The KQ Lenders Company Limited comprises of 11` commercial banks which will now own 35.7 per cent of the national carrier with an allocation of 10.7 billion shares.
KLM will see its shareholding fall from 26.73 per cent to 13.71 per cent, while the government which the carrier owes Sh27.2 billion (inclusive of accrued interest), is also converting the debt into shares, a move that is set to increase its stake in the airline from 29.8 per cent to 46.53 per cent.
According to KQ’s board chairman Michael Joseph, dutch airline 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,” said Micheal Joseph in the circular.
In 1995, Kenya signed a negotiated five-year master agreement with KLM that would see the dutch airline acquire a 26 per cent stake in KQ.
The agreement spelt out the routes the airlines would fly, the fleet size, type and the range to be covered.
The deal was expected to facilitate KQ’s expansion and also return value to KLM. After the five-year initial period, the deal mutated into a 10-year strategic plan between KQ and KLM.
To align with the agreement, Kenya Airways had to revise its Memorandum and Articles of Association. Legal and aviation experts say this is the point at which KQ began the steady slide into technical bankruptcy; as the Kenyan Government and other shareholders lost all substantive commercial and administrative control of the national carrier to KLM.
The new financial restructuring plan is set to mark the final phase of KQ’s restructuring strategy, that is expected to return the embattled airline to it’s profitability by reducing its current debt exposure by Sh51 billion to Sh242 billion.