KQ in talks with foreign investors to buy a stake for cash

September 27, 2016
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According to the research firm, the search for a strategic investor is part of a plan, drawn up with the help of US investment bank PJT Partners, to raise new debt and equity funds/FILE
According to the research firm, the search for a strategic investor is part of a plan, drawn up with the help of US investment bank PJT Partners, to raise new debt and equity funds/FILE

, NAIROBI, Kenya, Sep 27 – National carrier, Kenya Airways is talking to at least three foreign institutional investors and airlines about buying a stake to raise cash for the carrier.

Standard Investment Bank Research says the company did not disclose how much it plans to raise but has previously suggested that it may need about Sh70 billion.

The carrier is also talking to its creditors, including banks, to amend terms of its debt and provide it with sufficient funds for operation in the short term.

The government is still examining proposals for recapitalisation.

According to the research firm, the search for a strategic investor is part of a plan, drawn up with the help of US investment bank PJT Partners, to raise new debt and equity funds.

“The biggest concern for existing shareholders is the level of potential dilution, given the negative equity position of the airline,” Standard Investment Bank Research states.

The airline is 27 per cent owned by Air France KLM and 29.8 per cent owned by Kenya government.

KQ posted Sh26.2 billion net loss in its 2016 full year results impacted by Sh9.7 billion foreign exchange losses.

This is a marginal loss increase compared to Sh25 billion losses it made in 2015.

The losses are also attributed to increased cost of borrowing in the period under review incurring an additional Sh2.3 billion in interest expense.

The firm is currently working on a turnaround strategy that includes staff right sizing, and rationalising its fleet through selling off and leasing some of its surplus aircraft.

The airline in January 2016 sold two aircrafts to Oklahoma based Omni Air international at an estimated Sh14.6 billion.

An additional five aircraft have been sub-leased. The airline is however yet to sell its 30 acre piece of land at Embakasi.

The airline is set to send home up to 600 employees and has already sent home 80.

The company secured bridge financing to the tune of USD 200 million (Sh20 billion).
The first tranche of USD 100 million (Sh10 billion) was received in September 2015 and the second tranche was received in July 2016.

This borrowing is supported through an on-lending agreement from the Government of Kenya as a key stakeholder.

Kenya Airways has an extensive route network on the continent, operating numerous flights a week to major African cities such as Lusaka in the south and Accra in the west explaining the interest from potential suitors.

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