Kenya Airways has issued a cautionary notice to its shareholders and investors after the Cabinet approved a US$350 million, approximately Sh45.15 billion, government loan and a proposed restructuring of about Sh122 billion in existing government loans. The national carrier stated that the two measures aim to address its immediate financing needs and strengthen its balance sheet as it pursues a turnaround. This announcement follows a Cabinet dispatch on October 9, confirming approval of the financing to meet urgent obligations, including aircraft maintenance and returning grounded planes to service.
The proposed US$350 million shareholder loan is intended to support Kenya Airways' immediate operational requirements while implementing its longer-term turnaround plan. The financing will cater to critical expenses, including aircraft maintenance, the return to service of grounded aircraft, and other urgent operational obligations. According to the Cabinet dispatch, the funds will be disbursed in tranches under the oversight of the National Treasury, with a repayment period of up to 10 years.
Kenya Airways' CEO, Habil Waswani, has not made a public statement on the matter, but the airline has advised investors to exercise caution when dealing in its securities until the outstanding terms are determined and formally communicated to the market. The notice will remain in force and be renewed at intervals of no more than 60 days, or as otherwise required by applicable capital markets regulations, until the company issues a further announcement or formally withdraws it.
Alongside the new financing, the government has approved in principle the conversion of approximately Sh122 billion in existing shareholder loans to Kenya Airways, together with accrued interest, into an equity-qualifying tradable instrument. The proposed restructuring aims to address the airline's negative equity position, strengthen its balance sheet, and improve its creditworthiness. This move will also support planned capital-raising initiatives through the market using an Investment Memorandum and facilitate the onboarding of suitable strategic partners and investors.
The government-backed measures focus on two financial needs: providing funds for immediate operational obligations and restructuring existing debt to improve the carrier's balance sheet. Implementation of both measures remains subject to the relevant corporate, shareholder, and regulatory processes. Kenya Airways has stated that it will keep shareholders, regulators, and the investing public informed as material details are determined, including when definitive agreements are executed.
The Cabinet dispatch stated that the financing and debt restructuring measures form part of Kenya Airways' long-term turnaround plan and are intended to safeguard an airline that contributes more than US$1.3 billion annually to Kenya's gross domestic product through tourism, trade, and regional connectivity. The government has emphasized the importance of the airline's economic contribution and its role in supporting the country's economy.
Kenya Airways has directed investors to rely on information formally released through the NSE, the company's official communication channels, or other channels required by the CMA. The airline will make further announcements once the outstanding matters are sufficiently determined. The proposed instrument is not an immediate cash injection equivalent to the value of the existing loans but rather a planned restructuring of government debt, subject to the necessary corporate, shareholder, regulatory, and transaction approvals.
Key points
- The Kenyan Cabinet has approved a US$350 million government loan and a proposed restructuring of Sh122 billion in existing loans to support Kenya Airways' turnaround plan.
- The financing and debt restructuring measures aim to address the airline's immediate financing needs and strengthen its balance sheet.
- Implementation of the measures remains subject to negotiations, definitive transaction documents, shareholder approvals, and regulatory clearances.
