Treasury: Kenya has paid $109m of KQ debt
SATURDAY MARCH 16 2024
Kenya Airways is 48.9 percent owned by the government and a group of 10 local banks which has 38.1 percent shares. PHOTO | FILE | NMG
By JAMES ANYANZWA
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The National Treasury has paid $109 million to the American Eximbank to save Kenya Airways from bankruptcy proceedings after the national carrier defaulted on $841.6 million loan from the Washington-based lender in the 2021/2022 financial year.
KQ took up the loan in 2017 to buy seven planes and an engine, with $525 million being guaranteed by the government.
Outgoing National Treasury chief in-charge of Debt Management, Haron Sirima, told
The EastAfrican that the government has paid Eximbank Ksh15.04 billion ($109.36 million) and is ready to fulfil the remaining obligations.
“The Treasury will service the debt as principal instalments and interest payments fall due,” Dr Sirima said.
The National Treasury said in its annual debt management report (2022/2023) that the government paid Ksh12.32 billion ($89.58 million) to Eximbank in the 12 months to June 30, 2023, reducing the debt to Ksh88.22 billion ($641.49 million).
A report by the Controller of Budget shows that in the three months to September 2023, the government paid a further Ksh2.72 billion ($19.78 million), bringing the total payments to Ksh15.04 billion.
As a result, Kenya Airways’ outstanding debt to Eximbank stands at Ksh73.18 billion ($532.13 million).
Treasury Principal Secretary, Chris Kiptoo, told a parliamentary oversight committee on public debt and privatisation in February last year that Eximbank had issued a default notice after Kenya Airways delayed honouring its obligations.
Normally, when a business defaults on a loan, the lender may seize its collateral and/or personal assets to recover the losses.
The KQ loan was a 12-year facility originally provided by Citi Bank and JP Morgan before Pefco took it over, with the US Exim Bank and the Kenyan government joining as guarantors.
KQ, which is a subject of a failed takeover bid by the state, is 48.9 percent owned by the government and a group of 10 local banks which has 38.1 percent shares.
Other shareholders are KLM Royal Dutch Airline (7.8 percent), employees (2.4 percent) and other shareholders at 2.8 percent.
The government has been pushing for the restructuring of the airline under a plan that aims to reduce its network, operate a smaller fleet and possibly reduce its workforce further.
As a result, the airline has focused on restructuring its fleet, including selling aircraft and sub-leasing to other airlines in an attempt to return to profitability.
Kenya Airways took up the loan in 2017 to buy seven planes and an engine, with $525 million being guaranteed by the government.
www.theeastafrican.co.ke
