A Bill that will guide the sale of Kenya Airways (KQ) to the
State was tabled in Parliament on Thursday, setting the stage for the
buyout of minority shareholders at a premium and converting shares held
by banks into Treasury bonds.
MPs will now start debate
on The National Aviation Management Bill 2020 as the National Assembly
seeks to have the government take back full control of the national
carrier by October.
The loss-making airline, which is
48.9 per cent government-owned and 7.8 per cent held by Air France-KLM,
was privatised 24 years ago but sank into debt and losses in 2014.
“We are ready to complete the transactions once Parliament passes the Bill,” Treasury Secretary Ukur Yatani told the Business Daily in an interview.
“A
lot of work has been done in the background including striking an
agreement with KLM and talks are advanced with banks on conversion of
their equity to bonds.”
Air France-KLM, which had the
option of selling its stake to the government and staying on as a
technical partner for the airline, has opted to exit.
Kenya has reached an agreement with Air France-KLM on the offer
price, which will be a premium on the carrier’s prevailing trading price
at the Nairobi bourse.
The same KLM offer price will
be used to acquire the minority shareholders, who hold about 2.8 per
cent of the shares currently valued at Ksh397 million ($3.9 million).
“We
have already developed a formula for valuing the shares owned by the
minority shareholders,” Solomon Kitungu, the Principal Secretary at the
Ministry of Transport, said Thursday.
“We cannot make it public before we share with CMA (Capital Markets Authority) because Kenya Airways is a listed firm.”
Kenya Airways shares closed trading at Ksh2.49 ($0.024) on Thursday compared to Ksh9.65 ($0.09) in May 2018.
David Pkosing, the chairman of parliament’s transport committee, said Thursday MPs will seek to pass the Bill swiftly.
Mr
Pkosing said the committee has set a budget of Ksh800 million ($8
million) for purchase of the minority investors, representing a premium
of 101 percent.
A consortium of local lenders, who
acquired 38 per cent of the company’s equity during the 2017
restructuring, could be paid through government debt, possibly in
10-year Treasury bonds, Mr Yatani said.
The lenders’
shares have a market value of Ksh5.38 billion ($53 million). KQ issued
the banks the 38.1 per cent stake to settle their claims of Ksh16.9
billion ($169 million).
A failed expansion drive and a
slump in air travel forced the airline to restructure Ksh200 billion ($2
billion) of debt in 2017. But Kenya Airways still needed cash for fleet
and route expansion amid growing competition from Ethiopian Airlines
and Emirates.
Kenya wants to emulate countries like
Ethiopia, which runs air transport assets - from airports to fuelling
operations—under a single company, using funds from the more profitable
parts to support others.
Under the Bill, Kenya Airways
will become one of three subsidiaries in an Aviation Holding Company.
The others will be Kenya Airports Authority, which will operate all the
country’s airports including Jomo Kenyatta International Airport (JKIA)
in Nairobi, under an investment arm dubbed Aviation Investment
Corporation.
Nationalisation will exempt Kenya Airways
from taxes on engines, maintenance and fuel, allowing it to sell cheaper
tickets, Mr Pkosing said.
The airline charges more than competitors, forcing price-sensitive passengers through hubs like Addis Ababa and Kigali.
The
Treasury last month turned down KQ’s request for a Ksh7 billion ($70
million) emergency bailout after its aircraft were grounded due to the
restrictions on international passenger flights sparked by the
coronavirus disease pandemic.
Kenya Airways needed the
money to foot maintenance costs of grounded planes, pay salaries and
settle utility bills like security, water and electricity.
Mr
Yatani said the State was keen on a long-term solution anchored on
nationalisation of Kenya Airways, arguing that the carrier’s financial
troubles went beyond the Covid-related woes.
KQ sank
deeper into financial red after it posted a Ksh12.98 billion ($129
million) net loss for the year ended last December as increasing
operating costs offset growth in revenues.
The
airline’s performance is set to fall further in the year ending December
after government and global restrictions to curb spread of Covid-19 saw
it ground all flights on March 22.
The national
carrier has been operating only cargo flights for essentials such as
medicine but this has not been enough to sustain business given that it
was already in a loss territory pre-coronavirus.
No comments :
Post a Comment