KENYA AIRWAYS SHARE RIGHTS ISSUE MEETS ONLY MINIMUM TARGETS
Information availed yesterday from Nairobi indicates that the much hyped share rights issue by Kenya Airways, aimed at raising some 21 billion Kenya Shillings, achieved a take up of about 14.5 billion Kenya Shillings according to airline executives and their financial advisory team. This meets the minimum target given at the onset of the exercise, when a 70 percent acceptance was set as the threshold for success, though privately several sources within and close to the airline expressed their personal regret of not having been able to go way beyond that figure. A lot of private investors, which make up a significant percentage of shareholders, have forfeited their rights. Our bankers and financial brokers attributed that to the high interest rates in the market, which made it very difficult in times of inflation to then commit major savings or borrowed funds for the acquisition of shares. As far as that is concerned it was a bit unfortunate with the timing but the airline had to move and has accomplished their minimum target said a regular source from Nairobi, when asked to comment on the results. At the same time did the share value fall back to 14 KShs per share, the actual price for which the share rights were sold, compared to about 16.35 KShs per share when 2 weeks ago Virgin announced plans to withdraw from Nairobi by September this year, giving KQ a windfall in passenger numbers to the UK, when that happens.
Under the carriers 10 year strategic plan, known as Plan Mawingo, the fleet of The Pride of Africa is set to grow from its present 35 aircraft to 119, including 12 freighters, while aiming at 115 destinations on all continents, up from their present 56. The estimated cost of this ambitious expansion plan, at current prices, is thought to be between 3.5 and 4 billion US Dollars and the just concluded share rights issue was primarily to raise funds to pay up to 150 million US Dollars for loan guarantees and down-payments for new aircraft due to come on line over the next 2 years, including the long awaited B787 Dreamliner due for first delivery in Q1 of 2014.
Notably did the share of the Kenya government, which took full advantage of the offer, rise from previously 23 percent to almost 30 percent while the single largest shareholder KLM, holding 26 percent prior to the right issue, was apparently not given their full intended share, hence bringing their holding to only 26.7 percent instead of what could have been 33 percent. Here clarification is being sought why KLM was not apparently permitted to absorb more rights to be turned into shares, as it would have driven the overall take up deep into the 70 percent range. Equally, talks taking place with other investors to take up forfeited share rights, seem to have hit either a dead end or else are ongoing behind the scenes, leaving the door open to still raise more funds.
Other sources attributed the lower than expected take up on the immediate uncertain future of Kenya, now counting down to general elections probably due in March 2013, which has already raised fears over a renewed outbreak of ethnic violence similar to the last elections, and while growth forecasts for Kenya still stand strong, a reduction of tourist traffic might translate into lower flight occupancies and lower profits for KQ, all issues for shareholder to consider who might have high expectations on future dividends, while aviation analysts predict a tough year ahead mainly due to rising fuel and labour costs for the airline. Watch this space for regular and breaking aviation news from the Eastern African region.