Kenya Airways shares plunge, Sh12 billion hit for banks
As Kenya’s National Treasury plans to close the buyout of Kenya Airways (KQ) by the end of 2020, ten local banks including Equity Bank Kenya, Kenya Commercial Bank and NCBA Bank Kenya have suffered a combined loss of Sh12.7 billion
January 02, 2020: As Kenya’s National Treasury plans to close the buyout of Kenya Airways (KQ) by the end of 2020, ten local banks including Equity Bank Kenya, Kenya Commercial Bank and NCBA Bank Kenya have suffered a combined loss of Sh12.7 billion on the airline’s shares as the carrier’s stock plummeted to new lows. KQ in 2017 issued the lenders with 2.2 billion shares to settle their loans amounting to Sh17 billion.
The buyout plan came after the State House Kenya voted in July to nationalise the carrier and save it from mounting debts.
The shares were acquired at a price of Sh7.78 by each bank but the airline’s stock price has since dropped 73 percent to trade at lows of Sh2 in recent days, resulting in the loss for the lenders.
The banks are now pinning their hopes on a generous buyout offer from the government which has decided to nationalise the company once again.
KQ is 48.9 percent state-owned, 38.1 percent (lenders), 7.8 percent (Air France-KLM), 2.4 percent (Kenya Airways) employees, and 2.8 percent (individual investors). Lenders, who acquired a stake in the company’s equity during the 2017 restructuring, could be paid through government debt, possibly 10-year treasury bonds.
KQ shares at the Nairobi Securities Exchange (NSE) closed at 2.05 on December 31, a -0.10 plunge as compared to the previous day closure.
