Kenya races to pay US bank Sh3 billion for due KQ loan
The Treasury is expected to wire Sh3.27 billion ($24.8 million) to the Export-Import Bank of the US by tomorrow in additional overdue principal and interest payments of a Kenya Airways (KQ) debt taken over by the State last year.
This will bring to Sh8 billion the total amount it shall have paid on behalf of KQ this month alone.
“As part of a standard process, the Export-Import Bank of the US issued what is known as a demand notice to the Government of Kenya for an overdue payment. On March 3, the GoK paid $37.4 million (Sh4.77 billion) in overdue principal, and is processing the additional overdue principal and interest of $24.8 million by March 31, 2023,” Sean Bartlett, Senior Vice President of Communications at the Exim Bank of the US told Nation yesterday.
A demand notice requires a customer to settle outstanding payments, failure to which the business may take legal action.
The Exim Bank also clarified that the notice “did not demand full payment of the outstanding loan.
“Exim is working closely with the Government of Kenya on the next steps to put Kenya on the best path forward for future payments. EXIM has a long history of working with the Kenyan government and Kenya Airways,” said Mr Bartlett.
The State last year took over a $525 million (Sh68.91 billion) debt it had guaranteed KQ after the airline defaulted on payment.
The State in 2017 guaranteed the loan that has a 10-year tenure running until June 2028.
The carrier had borrowed $841.6 million (Sh110.54 billion) from the US Exim Bank to buy seven aircraft and an engine but failed to fully service the debt due to cash flow challenges linked to Covid-19 disruptions.
This forced the State to take over 62.4 per cent of the debt it had guaranteed the airline.
“Kenya Airways defaulted on both the guaranteed portion of the loan amount as well as the non-guaranteed portion. The National Government is in the process of novating the debt to be finalised during the 2022/2023 fiscal year,” Treasury said in the 2021/22 Annual Debt Management Report.
Currency losses from the loan coupled with higher fuel prices saw KQ report a Sh38.26 billion loss for the financial year ending December, the worst since it entered the loss-making territory a decade ago.
The net loss grew 1.4 times from the Sh15.87 billion posted in the previous financial year and takes the national carrier’s accumulated loss to Sh172.68 billion.
“Net financing cost increased by Sh23 billion because of a one-off transaction that was taken during the year pertaining to the takeover of a US dollar-denominated loan by the Kenyan government which converted the loan to Kenyan shillings,” said Hellen Mathuka, chief financial officer at KQ.