Kenya: Plans to Buyout Kenya Airways Investors Gather Steam

Kenya Airways planes (file photo).

Kenya's National Treasury is planning to buyout Air France-KLM, local banks and more than 80,000 individual shareholders from Kenya Airways and delist the national carrier from the Nairobi Securities Exchange (NSE).

Transport Principal Secretary Esther Koimett told parliament that the buyout plan comes after the House voted in July to nationalise Kenya Airways and save it from mounting debts.

The Transport ministry is working with the International Finance Corporation to recruit a technical expert to conduct a fresh valuation.

The loss-making airline is 48.9 per cent government-owned, 38.1 per cent (lenders), 7.8 per cent (Air France-KLM), 2.4 per cent (Kenya Airways employees) and 2.8 per cent (individual investors).

"You have to ensure that everybody gets their dues, that is why you have to do valuation. It is a matter of getting shareholders to pass the necessary resolutions to facilitate the payouts within the law," said Ms Koimett.

She added that the technical expert will be hired before Christmas festivities and that the government targets to close the buyout by end of next year, setting the ground for its delisting from the NSE where the national carrier was listed in 1996 through a privatisation plan.

Kenya Airways shares have plunged 81 per cent at the Nairobi bourse to Ksh2.72 (2 US cents), valuing the carrier at Ksh15.45 billion ($145.5 million).

The market valuation puts the lenders' stake at Ksh6 billion ($60 million), Air France-KLM Ksh1.23 billion ($12.3 million), Kenya Airways employees Ksh380 million ($3.8 million) and small investors Ksh443 million ($4.43 million).

A consortium of local lenders, who acquired 38 per cent of the company's equity during the 2017 restructuring, could be paid through government debt, possibly 10-year Treasury bonds, an official at the Transport ministry said. They converted the Ksh17 billion ($170 million) debt into equity.

Financial duress

Kenya Airways chairman Michael Joseph warned of financial duress for the national carrier if the buyout deal and the nationalisation plan are not completed in the next six months.

"We need a decision because in the next six months we run the danger of considering alternative measures that are not pleasant," Mr Joseph told MPs without giving details.

Kenya wants to emulate countries like Ethiopia, which run air transport assets--from airports to fuelling operations--under a single company, using funds from the more profitable segments to support others.

Under the model approved by Parliament, Kenya Airways will become one of four subsidiaries in an Aviation Holding Company.

The others will be Jomo Kenyatta International Airport, the country's biggest airport; an aviation college and Kenya Airports Authority, which will operate all the nation's other airports.

Kenya Airways could renegotiate its aircraft leases based on its reduced risk profile, he said, noting that the airline needs more than its 40 planes.

JKIA alone has annual revenues of Ksh12 billion ($120 million), half of which is profit, a parliamentary report shows. Nationalisation will exempt Kenya Airways from taxes on engines, maintenance and fuel, allowing it to sell cheaper tickets, the report says.

The airline charges more than its competitors, forcing price-sensitive passengers through hubs like Addis Ababa and Kigali. - Business Daily

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