Kenya Airways is obligated to repay USD 150 million to the government through a loan agreement by mid-2025, following government settlement of unpaid loans. The Treasury’s repayment plan to avoid default has faced challenges, including bank rejections of bond repayment offer. The matter is now included in the supplementary budget for parliamentary review.
Kenya Airways (IATA: KQ), based at Nairobi Jomo Kenyatta International Airport, is obligated to repay USD 150 million to the Kenyan government. This repayment will occur through a shareholder loan agreement, with negotiations to conclude by mid-2025. This announcement was made by Treasury Cabinet Secretary John Mbadi in a notice to the Kenyan parliament.
The repayment requirement arises after the government, acting as a sovereign guarantor, settled KES 19.3 billion (approximately USD 150 million) in unpaid loans owed by Kenya Airways to a group of Kenyan commercial banks by the end of August 2024. The settlement was necessary to avoid a sovereign default that could adversely affect Kenya’s credit rating.
The banks, collectively referred to as KQ Lenders, which hold 38.1% of Kenya Airways, had previously rejected the Treasury’s proposal to repay the loan using a 6.5-year bond. This consortium includes prominent institutions such as Equity Bank, KCB Group, and Cooperative Bank.
On January 3, the Kenyan government withdrew the funds as an emergency measure without prior parliamentary approval. According to the Business Daily, the loan repayment agreement has been integrated into the supplementary budget for review by parliament. The ch-aviation website has also sought a response from Kenya Airways for further comment.
In summary, Kenya Airways must repay USD 150 million to the Kenyan government as part of a shareholder loan agreement by mid-2025. This requirement follows government action to settle the airline’s unpaid loans to commercial banks, which was essential to prevent a sovereign default and protect the nation’s credit rating. The government’s withdrawal of funds without parliamentary approval further complicates the situation.
Original Source: www.ch-aviation.com
