KQ considers rights issue ahead of nationalisation

Kenya Airways is still considering selling new shares to small investors ahead of the carrier’s nationalisation.

The Nairobi Securities Exchange-listed airline had promised to run a heavily discounted rights issue that would raise about Sh1.5 billion as part of its debt restructuring in 2017.

KQ, as the carrier is known by its international code, said this would help retail investors recover from their dilution after more shares were issued to new and existing major shareholders including local banks and the National Treasury.

Nationalisation of the airline has sparked fears that the rights issue has been abandoned.

KQ chairman Michael Joseph told the Business Daily Tuesday that the matter is still under review.

“We are still going through this process with the (transport) ministry and other stakeholders. Nothing has been cancelled, nothing has been decided,” he said.

If KQ keeps its promise, retail investors will be given an opportunity to buy shares at a discount before being bought out later alongside the other shareholders including banks.

The small investors were diluted 95 percent besides their number of shares being reduced by a factor of four as part of efforts to rescue the airline from collapse.

The government and a consortium of local banks also converted their combined Sh60 billion ($587.6 million) debt into equity at a price of Sh7.78 per share.

KQ had said the rights issue (alternatively dubbed the open offer) — in which the government and the banks are barred from participating — would be one of the final steps in the balance sheet restructuring.

The company said the shares will be sold to the small investors at a price below which the major shareholders converted their debt, implying an unprecedented discount of more than 50 percent against current market price of Sh3.

KQ said the open offer will be made to existing retail investors but who will have to apply for the new shares before they qualify to buy the stocks or acquire the rights to transfer them to other investors.

Nationalisation of the airline is the latest proposal to rescue the company after earlier moves, including its merger with Kenya Airports Authority, were opposed.

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