11 Kenyan banks vote on Kenya Airways' debt-equity swap proposal

Private sector activity in Kenya has continued to deteriorate, with July's Purchasing Managers Index (PMI) by Stanbic Bank showing a slight improvement but still below the optimal level at 48.1 percent. This decline in production has been attributed to the upcoming elections and the shrinking of credit to the private sector. Michelle Nyeong-Ori, a Research Analyst at Zimele Asset Managers in Nairobi, discussed these economic indicators during a recent CNBC Africa interview. He mentioned that the government may need to address the impact of the interest rate capping law, as it is affecting bank profits and hindering private sector growth. Despite challenges, the Nairobi Securities Exchange (NSE) has shown resilience, with the NSE20 index remaining stable around the 3600 mark. Foreign participation in the market has been active, contributing to the recovery of the NSE from a low point in late 2016 to early 2017. However, not all sectors are performing well, with some companies still facing challenges, particularly in the oil and banking industries. Turning to the aviation sector, Kenya Airways' creditors, consisting of 11 banks, recently met to vote on a proposal to convert the airline's 50.2 billion Kenyan shillings debt into shareholding. This debt-equity swap, part of Kenya Airways' capital optimization strategy, aims to improve the airline's financial position. While some banks, like Equity Bank, have shown support for the proposal, others, such as Co-operative Bank and Jamii Bora Bank, have expressed reservations. The success of this initiative alone may not be sufficient to solve Kenya Airways' long-standing financial issues. The government has also requested an additional loan of over 19 billion Kenyan shillings to support the airline's recovery efforts. Looking ahead, it is crucial for Kenya Airways to explore other strategic measures, including attracting strong investors and enhancing operational efficiency, especially with the launch of new routes to the US. The outcome of the vote and subsequent decisions will be critical for the future of the airline as it navigates through turbulent times.