Troubled Kenyan national carrier, Kenya Airways, has been suspended from trading on the Nairobi Securities Exchange (NSE).
The suspension sets the stage for the loss-making carrier’s exit from the bourse and completion of planned management takeover and eventual buy-out of minority shareholders by the government following publication of the National Management Aviation Bill 2020 late last month.
"Consequently, the company has applied for suspension of trading in its shares and closure of its register until the resolution of its future is determined," said a statement released by the NSE, Friday.
"The suspension from trading takes effect from July 3, 2020 and will remain in force for a period of three calendar months."
The carrier is grappling with a negative working capital of Ksh42.15 billion ($400 million). Its net loss for the year 2019 widened to Ksh12.97 billion ($129.7 million) from Ksh7.58 billion ($75.8 million) in 2018.
In May last year the NSE management reinstated the airline as a constituent counter of the NSE 20 Share Index, three years after it was dropped from the list due to financial troubles.
Close to 80,000 small investors whose shareholding was significantly diluted during the initial restructuring plan that saw the government increase its shareholding in KQ to 48.9 per cent from 28.9 per cent in 2017 will have to await a buyout offer from the state.
Company statements show retail investors, excluding the large institutional and individual shareholders who owned 24 per cent of the airline, saw their shareholding diluted to a low of 2.8 per cent after the restructuring.
On the other hand, the 10 banks that own 38.1 per cent of the airline through a special purpose vehicle — KQ Lenders Company — after converting their $165 million debt into equity, are well cushioned after it emerged that the National Treasury guaranteed the value of their shares in case they fell below the amount owed to them by the airline.
"The small investors are going to receive the biggest hit in this compulsory takeover by the government because their shareholding has been significantly diluted. On the other hand, the Treasury and the banks agreed that the government provides a guarantee on the value of their shares so that they don’t fall below the debt they are owed by KQ," said James Kariuki, an aviation expert and chairman of the China-Dubai Traders Association.
"Banks were forced to take up these shares because the airline did not have money to pay them […]