The Kenyan government has agreed to convert some of Kenya Airways' debt into equity, which means it will own a almost 50 per cent stake in the troubled carrier, according to state media.
Cabinet Secretary of the National Treasury Henry Rotich said in a statement released in Nairobi that the government advanced loans to Kenya Airways (KQ) amounting to approximately 240 million USA dollars.
KQ cut their loss by 61 percent in 2017 to register a net loss of Sh10.2 billion compared to the Sh26 billion it recorded in 2016.
The Government of Kenya which had a 29.8 percent stake in the airline will see its stake increased by 19.1 percent to 48.9 percent in the airline. Air France-KLM has a 26.7 percent stake in the airline.
"In addition to acquisition of equity under the debt conversion and subscription agreement, the government and KQ have entered into a zero coupon ordinary mandatorily convertible loan agreement in relation to settlement of the remaining portion of the government loans".
Local banks which lent the airline a total of Dollars 217.2 million will see the issuance of 2.2 billion ordinary shares equivalent to a 38.1 percent ownership through a special goal vehicle set up by the banks called KQ Lenders Company.
They have applied to the market regulator for exemption from making a take-over offer, in line with regulations, since the transaction is aimed at rescuing the carrier.
Last month, the company said it was in talks with the government as it sought help in coping with competition from foreign carriers operating flights to its Nairobi hub.