Kenya Airways has breached the terms attached to loans worth billions of shillings from the African Export and Import Bank (Afrexim) which could impose penalties or ask for early repayment of the debt.
The multilateral lender provided the credit to help the national carrier acquire aircraft.
KQ, as the airline is known, did not specify the broken covenants but said it is seeking waivers from Afrexim.
“One of the facilities for the purchase of 10 Embraer E190 aircraft, contains some financial covenants, which are monitored against the annual audited financial statements,” the company says in its latest annual report.
“The group is not in compliance with all the financial covenants and is in the process of obtaining waivers from the financiers.”
The recent move by KQ to erase some Sh50 billion of debt by replacing the obligations with its own shares is expected to strengthen its balance sheet, improving compliance with the terms set by outstanding creditors.
The company owed Afrexim Sh21 billion as of March. The multilateral lender is owned by 38 African governments and institutional investors including South Africa’s Rand Merchant Bank.