Kenya government takes over national carrier Kenya Airways in a debt swap deal

Kenyan government is set to take over control of the national carrier, Kenya Airways by raising its stake to 48 percent, from the current 29 percent shareholding as its capital optimization takes effect.

The government has given Kenya Airways more than $200 million of Kenyan shilling and dollar-denominated loans, the airline said in a statement on Monday to the Nairobi stock exchange. The deal also gives 11 local banks a 38.1 percent stake, which will be held in a special purpose vehicle called KQ Lenders Co, local online website, the Standard reports.

“In addition to acquisition of equity under the debt conversion and subscription agreement, the government and KQ have entered into a zero coupon ordinary mandatorily convertible loan agreement in relation to settlement of the remaining portion of the government loans. The effect of the zero coupon ordinary mandatorily loan convertible loan agreement is the issuance of ordinary shares to the government at a future date,” Treasury Cabinet Secretary, Henry Rotich said.

However the government does not intend to make a takeover offer of the struggling airline.

Moreover, the KQ Lenders Company that comprises of 11 banks will also take over 38.1 percent stake in the company.

KQ cut their loss by 61 percent in 2017 to register a net loss of Sh10.2 billion compared to the Sh26 billion it recorded in 2016.

Source: CGTN Africa