Kenya Airways. [Photo/Kahawatungu]
The Nairobi Securities Exchange (NSE) yesterday suspended trading of Kenya Airways (KQ) shares for two weeks to facilitate the company’s share split pursuant to a decision reached earlier this week.
National Treasury and 11 local banks on Monday agreed to convert more than Sh44 billion of the airline’s debt into equity, in a transaction which will eventually see government ownership in the troubled air company rise to 48.9 percent and diluting KLM Royal Dutch Airlines stake to 7.8 percent.
“Notice is hereby given on the suspension in trading of Kenya Airways PLC effective November 15 up to and including November 28. The suspension is to facilitate the share split and simultaneous consolidation of the company’s shares which forms part of the Kenya Airways PLC capital transaction,” NSE said in a notice to shareholders.
The split was approved by Capital Markets Authority (CMA) on Tuesday and will see an instant upsurge in the State’s stake from 29.8 percent in a transaction whose conclusion is slated to end this week. Local banks, through KQ Lenders Company, will control 38.1 percent.
A share split is a corporate decision in which a company with trading activities at the course, divides its existing shares into multiple shares. Although the number of shares outstanding increases by a specific compound, the total value remains the same compared to pre-split amounts, since the split does not add any real value.
The national carrier’s restructuring plan being undertaken through a conversion of some debt into equity and the provision of some guarantees by the government is a bold attempt to rescue the airline from folding up following a record net loss of Sh26.2 billion it announced in 2015.
The objectives of the restructuring plan are to reduce the airline’s overall level of borrowings, increase the amount of cash available to its business as well as numerous deep cost-cutting transactions needed to make it stay afloat.