Kenya Airways postpones announcement of share rights issue, combines it with annual financial results publication


Regular sources were tightlipped at Kenya Airways head offices in Embakasi / Nairobi over the true reasons why the expected media announcement over the performance of the share rights issue was suddenly postponed by a week to 06th June. There is speculation in the market that the airlines financial advisory team is locked in talks with institutional investors from Kenya, the region and further abroad, to potentially absorb any share rights which may not have been taken up during the main sales period in April this year.
Launched with great fanfare and expectations, President Mwai Kibaki was Guest of Honour at the Kenyatta International Conference Centre in Nairobi for the function, there have been both expressions of hope for an oversubscription of the issue inspite of adverse market conditions with continuously high interest rates in Kenya, which made individual investors perhaps back away from this unique opportunity to outright skepticism if indeed the minimum success threshold of 70 percent take up would be significantly exceeded.
It is however understood from contact made in financial circles at the launch ceremony that an agreement has been reached to extend the deadline at which either an irrevocable bank guarantee or Letter of Commitment must be received by the airline for the take up of share rights, has been pushed to the 11th of June, while on the 06th of June, when the announcement of the share rights issue success will be made, the airline is also expected to announce their annual financial results in Nairobi at a major press conference.
The airlines information booklet issued at the start of the sale of the share rights, provides for other investors to take up more than their share or buy on the open market should unsold rights remain and it could be as much as 23 percent of those still seeking new owners according to one source demanding strict confidentiality, who claimed that the issue had reached a 77 percent success rate, 10 percent above the threshold set ahead of the exercise. The same source also insisted that the airline was close to concluding a deal with an international investment group but found itself out of time vis a vis the initially set announcement date of 30th May, much to the disappointment of the media and the financial markets which had keenly looked forward to this date.
On further investigation it was also learned that the trading date at the Nairobi Stock Exchange for the new shares, which was due to commence on June 14th, has subsequently also been pushed ahead to June 21st to cater for the negotiations to conclude.
Share values in Kenya Airways had at the crucial launch briefly gone below the 14 Kenya Shillings at which the rights were offered but have recovered significantly since then, spurred two weeks ago by the announcement that Virgin would withdraw from Kenya by September, leaving the hugely important route between Nairobi and London Heathrow to archrivals Kenya Airways and British Airways, although KQ is expected to absorb most of the 15 percent market share Virgin enjoyed until the announcement.
There is broad agreement that Kenya Airways shares will be a sound medium to long term investment and the growth plans of the airline include a huge fleet expansion from presently 35 aircraft to 119 aircraft by 2021/2 including dedicated cargo aircraft which would be needed to back up plans to fly to 115 destinations worldwide by then. The funds now raised by the share rights issue will be used to leverage the financing of new aircraft, pay commitment fees and in particular use up to 150 million US Dollars for the required payment to the US IMPEX Bank for guaranteeing the purchases the airline has pending already with Boeing and the added acquisitions needed to meet the 10 year targets as formulated under their new strategic Plan Mawingo.
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