Kenya Airways planes at JKIA. Loss-making national carrier, Kenya Airways has received a major financial boost after the exchequer pledged to take over $827 million (Sh93.5 billion) of its debt.
The National Treasury further plans to pump in $473 million (Sh53.5 billion) in direct budget support in the fiscal year that ends in June 2022 as well as the subsequent one.
The revelation by the government appears in the letter to the International Monetary Fund (IMF) dated December 2.
This comes just two months after the government converted a Sh24 billion debt held by the national carrier, known internationally as KQ into equity, causing an uproar in the Parliament.
The National Assembly’s Public Accounts Committee (PAC) summoned the National Treasury Cabinet Secretary Ukur Yatani to shed light on the debt swap deal and how the State’s equity in KQ had been treated in government books.
The Treasury acquired an additional 19.1 per cent stake after the State and domestic lenders agreed to convert debt into equity.
This is not the first time KQ is undergoing debt restructuring. In 2017, it undertook a financial restructuring, with the State and a consortium of local banks – KQ Lenders Company – converting their loans into shareholding.
This resulted in the Treasury increasing its stake to 48.9 per cent from 29.8 per cent.
KQ Lenders Company emerged as the second-largest shareholder with a stake of 38.1 per cent.
The restructuring diluted the shareholding of KLM, KQ’s longtime partner, to 7.8 per cent from 26.7 per cent while retail shareholders ended with a 1.78 per cent stake from 24 per cent.
KQ has failed to record a profit since 2014 and the losses have compounded the huge debts the airline took on to buy a fleet of new Boeing planes, pushing it into negative equity territory.The airline posted a Sh11.49 billion net loss in the six months ended June— a 19.8 percent cut from the Sh14.33 billion loss it incurred in the preceding similar period, taking its accumulated losses over the years to above Sh127 billion.At the same time, the exchequer has told Reuters that it aims to replace a nominal legal public debt ceiling with a debt anchor by the end of June 2022.Debt anchor means that the debt level sought will be clear, given the approved surplus target.But as with the surplus target, the assessment of the desirable level of the debt may be changed for reasons such as demographic trends or […]