Kenya Airways Debt Restructuring. Banks Offered Bond Swap as Airline Misses Loan Deadline.
Kenya Airways (KQ) has reached a critical juncture in its debt restructuring efforts as the deadline for settling Sh19.3 billion ($149.9 million) in loans from top commercial banks lapsed.
The 10 banks, including Equity, KCB, and Cooperative Bank, collectively own 38.1% of the airline and have been offered a 6.5-year Treasury bond in exchange for the outstanding debt.
The company reported its first half-year profit in over a decade in 2023, with a profit after tax of Sh513 million for January to June, overturning a Sh21.7 billion loss in the first half of 2022.
Despite this positive development, KQ still faces a negative equity position of Sh123.6 billion, a result of mounting debts and prolonged financial distress.
The proposed debt-to-bond conversion, along with the anticipated capital injection from a strategic investor, is crucial to addressing this deficit and securing KQ's future.
The Kenyan government, which holds a 48.9% stake in the airline, has been navigating a delicate balance in its efforts to support KQ's turnaround.
The recent withdrawal of the Finance Bill, which would have collected Sh346 billion in taxes this year, has further complicated matters, making it difficult for the Treasury to settle the bank debts in cash.
This financial strain led to the bond swap option being triggered as part of the guarantee pact.
"We want to remove any potential risk of not paying loans as and when they fall due. We want to deplete our debt stock quite significantly and, of course, when the new investor comes, they will increase equity since part of their money will be used to pay down debt." KQ CEO clarified.
KQ's CEO, Allan Kilavuka, has emphasized the company's focus is on reducing debt and attracting new investment