More than 78,000 small Kenya Airways shareholders are set for a massive dilution of their stake in the ongoing restructuring that could leave them owning only about 6.7 per cent of the national carrier from 43.7 per cent.
An analysis done by Genghis Capital, an investment bank, shows that based on Kenya Airways’ (KQ) current market price of Sh6.8 per share, the Treasury will emerge as the biggest shareholder of the national carrier with a 41.1 per cent stake immediately after conversion of its debt into shares.
The Treasury has announced plans to convert its Sh25 billion debt into ordinary KQ shares.
Eleven Kenyan banks, which collectively hold Sh23 billion worth of Kenya Airways loans, will hold a 33.7 per cent stake in the airline post the debt conversion as per the Genghis Capital analysis.
KLM, which is expected to inject about Sh10.3 billion into the airline, could see its stake drop to 18.7 per cent. The Treasury is currently the biggest KQ shareholder with a 29.8 per cent stake while KLM controls 26.7 per cent of the carrier.
An upcoming rights issue announced Thursday by KQ could see small shareholders who fail to participate diluted even further.
“We are looking at a possible dilution to current shareholders of approximately 5.7 times, which translates to a diluted market price of approximately Sh1.2 per share,” says Genghis in a research note sent to its clients on Thursday.
“The turnaround programme in place will take time to yield solid business results, but in the short term, the ticker is deeply dilutive and speculative in nature,” Genghis adds.
Eleven Kenyan banks, including big lenders Equity, KCB Group, Co-operative Bank and Commercial Bank of Africa, are expected to swap the risky Kenya Airways loans for ordinary shares.
The restructuring is expected to be completed in a few weeks.
Genghis’ calculations are based on the assumption that the restructuring transactions will be based on KQ’s current market price of Sh6.8 apiece at the Nairobi Securities Exchange (NSE).
KQ’s restructuring plan also involves the government guaranteeing the airlines loans totalling Sh77.3 billion seeking to relieve it off repayment pressures and preserve its rating among creditors.
As at March 2016, Kenya Airways had 78, 577 shareholders on its roll, with local individual investors making up 95.3 per cent of this number.