National flag carrier Kenya Airways (KQ) is set to receive KES45.15 billion cash injection in a debt-for-equity transaction as part of restructuring push to turnaround the fortunes of the airline.

In a market update on Monday, the board of directors announced that the National Treasury has approved the fresh funding to steer KQ's "Project Kifaru" turnaround plan.

Acting CEO Habil Waswani noted that the turnaround plan seeks to pull the struggling airline from a negative equity position and help navigate it towards the path to profitability.

For years, the Nairobi Securities Exchange-listed company has experienced financial turbulence occasioned by fuel costs, competition and aircraft downtimes due to unavailability of vital spare parts.

In the latest push to drive KQ's turnaround, the government support will be used for addressing immediate operational needs including the maintenance of aircraft.

What's more, the financing will drive the return of grounded aircraft to the skies, offering a huge breakthrough in operations amid rising demand.

The KES45.15 billion loan has a tenor of 10 years and carries a conversion clause for the Treasury to increase its stake in the airline.

While the new loan addresses liquidity, the second component of the announcement tackles Kenya Airways’ chronic solvency issues. The government has granted "in-principle" approval to convert existing government shareholder loans, amounting to approximately KSh122 billion, along with accrued interest, into an equity-qualifying tradable instrument.

By converting debt to equity, the airline aims to shift from its current negative equity position to a positive one. 

KQ has long been a candidate for strategic partnership, but its leveraged balance sheet has historically deterred potential suitors.

"Shareholders and investors are advised to exercise caution when dealing in the securities of the Company," the notice reads, noting that the cautionary period will remain in force and be renewed at intervals of no more than sixty days until the terms are finalized.

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