Eleven local banks are set to get Sh. 23 billion worth of Kenya Airways shares in exchange for bailout.
This is according to a bailout strategy that has been proposed by the National Treasury.
“The 11 banks’ debt will move to equity. They can recover their debt in form of shares, by selling them on the stock exchange,” said Transport Secretary James Macharia.
The banks include KCB, Equity Bank, Co-operative Bank, Commercial Bank of Africa, I&M, Jamii Bora, Chase Bank, Diamond Trust Bank, Eco Bank, NIC Bank and National Bank.
However, if KQ’s share price will not have risen sufficiently to cover their exposure by 2027, the government has guaranteed to step in and pay these local banks a lump sum of $75 million (Sh. 7.7 billion). In the case of liquidation, the government will pay these banks Sh. 28.8 billion.
This comes shortly after the government announced that it will convert its Sh. 25 billion loan to KQ into shares.
These details are contained in a sessional paper tabled by National Assembly Majority Leader Aden Duale in the House.
KQ borrowed the short-term loans to meet its daily obligations such as paying of salaries as well as purchasing parts like engines. According to a local daily, as at March 2016, the carrier also had long-term (12-year) asset-backed loans totalling Sh. 105.5 billion from Barclays Bank Plc, Citibank and JP Morgan used to fund acquisition of aircraft.