Kenya Airways Announces Sh1.5bn Rights Issue for Small Investors

Kenya Airways has announced a revival of plans to implement a rights issue that will see small investors able to buy shares at a large discount.

An earlier estimation expected the transaction to raise more than Sh1.5 billion.

The company remained tight-lipped in March when the deadline for the cash call elapsed but now it reiterates a desire to carry through with the transaction.

“A rights issue was approved to be offered to the diluted existing shareholders. Plans for the issue are currently ongoing,” the airline says in its latest annual report.

As part of the efforts to save the carrier from collapse, its retail investors were diluted by 95 percent as their number of shares were reduced by a factor of four.

A consortium of local banks in conjunction with the government also converted their combined debt amounting to Sh58.7 billion ($587.6 million) into equity at the cost of Sh2.13 per share.

The rights issue (alternatively referred to as the open offer) would be one of the last steps taken in the balance restructuring process. However, local banks and the government are barred from participating in the transaction.

Kenya Airways said that small investors will acquire the shares at a price below which the major shareholders had converted their debt. This implies that a more than 40 percent discount against the current market price of Sh3.50.

The existing retail investors will be welcome to participate in the open offer with the condition that they have to apply for the new shares before qualifying to buy them or obtain the rights to transfer the stocks to other investors.