The Kenya Airways rights issue could start in November, an investment bank has said in a research note to investors following a briefing by the airline’s management last week.
The timing, according to Standard Investment Bank, could mean that Kenya’s biggest ever cash call is about two months away.
“The rights offer (is) expected in November 2011,” said the Standard Investment Bank report.
The national carrier (KQ) confirmed its intention of floating a rights issue in a cautionary announcement published last week. The share sale is expected to net the airline an estimated Sh22 billion, surpassing KCB’s offer which raised Sh12.5 billion last year and holds the record of the biggest ever secondary capital call at the Nairobi Stock Exchange.
The offer is, however, awaiting shareholders’ approval at an annual general meeting set for October 14, and the Capital Markets Authority (CMA’s) go-ahead.
“We cannot comment on the details until we get the approval from CMA,” said Kenya Airways corporate communications manager Chris Karanja.
Investment bankers who attended the briefing by KQ’s top management said the November date is based on the assumption that CMA will respond to the request for approval about one week after the AGM.
The offer is, however, not expected to delay beyond the first quarter of next year in a worst case scenario, the analysts said.
“After the approval they can launch any time with the offer opening in November and closing in December. However, the logistics could push it further,” said Eric Musau, an analyst at Standard Investment Bank.
A KLM and government commitment to take up their full rights supports the rights issue. The two are the top shareholders in the company with a combined stake of 49 per cent.
News of the planned cash call first emerged early this year, and sources familiar with the transaction plans said Kenya Airways’ management is keen to bring the issue to the market when their is heightened anticipation of the offer. With the recent slump at the bourse, the company would be cautious on how it approaches the market but analyst reckon that wide awareness of its plans could work well in its favour, with interested parties making early preparations to participate.
“Availability of funds by the government and also valuation of the shares will be at the back of their mind,” said Johnson Nderi, an analyst with Suntra Investment Bank.
Mr Musau said initiatives such as last week’s investor briefing and planned road shows ahead of the offer would help KQ to get a feel of pricing and the expected market response.
Rising inflation, the weakening shilling and uncertainty about interest rates has seen NSE’s performance drop to the worst in Africa in the month of August as per the latest market data.
KQ’s confidence is boosted by Treasury’s pledge to take up its full rights to protect the airline’s status of a national carrier.
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