Shareholders approve KQ Rights Issue

October 14, 2011
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, NAIROBI, Kenya, Oct 14 – Kenya Airways shareholders have approved plans by the airline to double its share capital as well as a Rights Issue.

KQ is in the process of raising funds to finance its fleet expansion and modernisation program.

Kenya Airways Chief Executive Officer Titus Naikuni however says the airline’s board has not yet formalised when the rights issue will be done or how much its intending to raise.

“We have a rough idea of the amount, but we are required to not disclose the amount until we get approval from the Capital Markets Authority,” Naikuni told journalists following an Annul General Meeting.

Following the shareholder approval, the board of directors formed a sub committee, charged with formalising the deal.

Naikuni said directors would determine the size and timing of the Rights Issue once regulatory approval has been granted in Kenya, Tanzania and Uganda, where the airline is cross-listed.

“The Rights Issue is very critical to the growth and expansion plans of the airline. The Board believes that in order for KQ to grow its fleet and route network, it is necessary to raise additional capital,” he said.

Kenya Airways current share capital is Sh5 billion, according to the agenda circulated at Friday’s meeting. KQ Group Financial Director Alex Mbugua said the company plans to create one billion new shares.

“Our balance sheet is quite small at the moment hence why we want to boost our equity,” Mbugua said.

The airline currently operates a fleet of 33 aircraft (that includes nine Embraers, 15 Boeing 737s, five Boeing 767s and four Boeing 777s). It however plans to more than triple its aircraft fleet to 107 by 2020.

In August, the company agreed to buy 10 aircraft from Brazil-based Embraer and signed an option to acquire another 16 from the Brazilian manufacturer.

It has also signed a leasing agreement with General Electric Aviation Services (GECAS) two Boeing 777-300ER aircraft.

Naikuni said the plans are to use a mixture of the rights issue funds and debt to finance the fleet expansion.

“The money from the rights issue will fund the pre-delivery element of the purchases since we are required to put down some money even before the aircraft are delivered,” he said.

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