Banks take Sh12bn hit in Kenya Airways shares

Ten local banks including Equity #ticker:EQTY , KCB #ticker:KCB and NCBA #ticker:NIC have suffered a combined paper loss of Sh12.7 billion on their Kenya Airways’ shares as the airline’s stock plummeted to new lows.

KQ, as the national carrier is known by its international code, in 2017 issued the lenders with 2.2 billion shares to settle their loans amounting to Sh17 billion.

The shares were acquired at a price of Sh7.78 each but the airline’s stock price has since dropped 73 percent to trade at lows of Sh2 in recent days, resulting in the lenders’ paper loss of Sh12.7 billion.

The banks are now pinning their hopes on a generous buyout offer from the government which has decided to nationalise the company once again.

Details of the nationalisation plan, including timelines and the price for buying out the banks and other shareholders, are yet to emerge. The lenders have not disclosed how they value their KQ holdings.

The move to nationalise the carrier comes after the company’s losses continued to rise, wiping its shareholder funds.

The Nairobi Securities Exchange-listed firm reported a Sh8.5 billion net loss in the half year ended June, more than double the Sh4 billion net loss the year before as costs rose faster than revenue.

Turnover in the review period rose to Sh58.5 billion from Sh52.1 billion, representing a 12.2 percent increase.

The loss saw the company’s negative equity widen to Sh16.1 billion from Sh2.4 billion, underlining its capital crisis.

KQ’s problems have been linked to a mix of increased competition, corruption, mismanagement and a previous debt binge that continues to weigh on its balance sheet.

Long-term individual investors have fared even worse since they will only break even if they are bought out at Sh21.2.

The small investors were diluted 95 percent besides their number of shares being reduced by a factor of four as part of efforts to rescue the airline from collapse.