Govt. eyes large Kenya Airways stake in debt restructuring deal

Kenya Airways
Kenya Airways plane. PHOTO| COURTESY

The cabinet has approved a proposal by Kenya Airways to guarantee its debt owed to the  Export-Import Bank of the United States and a consortium of local banks to the tune of Sh77 billion.

The move by the government comes on the backdrop of Kenya Airways improved full year performance where it halved its loss to Sh10.2 billion.

Sources have indicated to Citizen Digital that the cabinet approved to guarantee the debt in a special meeting last week.

Of the amount, Sh54 billion is owed to the export-import bank of the United States while a consortium of local banks are owed Sh23 billion.

In a memo to the national assembly, the cabinet is believed to have implored the August House to approve the loan since Kenya Airways needed a financial restructuring to reduce its overall debt burden and extend repayment period on some.

The memo further says that the government debt guarantee by Treasury will not require any additional cash injection by government as part of the restructuring process

While releasing the financial results two weeks ago, Kenya Airways chairman Michael Joseph had alluded to the financing deal, indicating that it would come through within two months.

The Cabinet also approved the conversion of its Sh4.2 billion current loan to KQ to be converted into equity, a move that would likely see an increase in its shareholding going forward.

The government currently owns 29.8 percent of the airline, with an increase in shareholding likely to strengthen its grip in decision making.

The Kenya Airways board last month appointed Sebastian Mikosz to take over from Mbuvi Ngunze as chief executive officer with an eye on turning around KQ’s fortunes.

While parliament is expected to pass the financing request for the national carrier, the debate in the house is likely to evoke previous hard stance taken by among others majority leader Adan Duale who ruled out any bailout to the carrier.

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Story By Mumbi Warui
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