This week Kenya Airways (KQ) announced the next phase of their restructuring, with a focus on their balance sheet.

While shareholders have been aware of the erosion of their equity at the airline, the reality may still be a shock.  A Business Daily story quotes a Genghis Capital report which projects that the airlines 78,000 shareholders will be several diluted as the airline has to put some equity back on its balance sheet. In the process of conversion and providing guarantees,  the airline’s largest shareholder, the Government of Kenya, will increase its stake to 41% as that of KLM will reduce to 19%.

The support confirmed by the Cabinet included conversion of the Government of Kenya loans into equity, and provision of contingent guarantees subject to parliamentary approval in exchange for material concessions to be provided as part of the financial restructuring, which would secure future funding of the company and would more importantly NOT require Government to provide CASH as part of the restructuring.

And coming on board as new shareholders will be several commercial banks (possibly as many as 11 banks) who will own 34% of the airline after they swap some loans for equity. Kenya Airways principal bankers are Citibank, Standard Chartered, Barclays, Equity and National Bank. Some of the main facilities are aircraft loans secured from Citibank NA, Citi/JP Morgan, African Export – Import Bank/ Standard Chartered Bank as well as an engine loan from Co-operative Bank. Some banks who had advanced different short-term facilities to the airline, up through their 2015 financial year include Equity Bank, Jamii Bora, KCB, CBA, I & M, Chase, National Bank, Diamond Trust, Co-operative, NIC and Ecobank.

See also: An investor asks if it the right time to buy KQ shares?