Nairobi drops plans to renationalise Kenya Airways

Nairobi drops plans to renationalise Kenya Airways

Kenya Airways Fleet The Kenyan government has scrapped its plan to renationalise Kenya Airways (KQ, Nairobi Jomo Kenyatta ) but instead will protect its financial interests during a USD1 billion restructuring of the flag carrier that will include a USD827 million debt take-over and a USD473 million cash injection, the International Monetary Fund (IMF) has revealed.

In a recent country report on Kenya, the IMF said: “The [Kenyan] authorities do not intend to nationalise the carrier and are considering appropriate mechanisms to protect the Exchequer’s [National Treasury’s] financial interests during the restructuring process”.

As part of putting Kenya Airways on a sustainable footing, the government will assume USD827 million of its debt. In addition, in FY2021/22 and FY2022/23, USD473 million will be provided as direct budgetary support to clear overdue payment obligations and to cover the upfront costs of restructuring, which will include a trimming down of the carrier’s fleet, network, frequencies, and staff complement, the IMF said.

By December, Kenya’s National Treasury (NT) will prepare a loan agreement with Kenya Airways that will include conditions for providing financial support to implement the restructuring plan. This will include clear KPIs, timelines, reporting obligations and a disbursement plan. The signing of loan agreements will follow the approval of the supplementary budget by the Kenyan Parliament.

This was disclosed in a letter of intent sent to the IMF on December 2, 2021, signed by Kenya’s Cabinet Secretary of the National Treasury & Planning Ukur Yatani and Central Bank of Kenya Governor Patrick Njoroge.

According to the letter, shared by the IMF, the Kenyan government will take responsibility for the full repayment of up to USD827.4 million of loans to Kenya Airways. Of this amount, USD750 million was already guaranteed by the government by the end of 2020. The government will service the debt based on the original amortisation schedule of Kenya Airways’ loan agreements.

Meanwhile, Kenya will continue to rely on concessional development financing, while continuing to tap global capital markets to roll over maturing Eurobonds, with the next Eurobond repayment falling due in June 2024, Yatani said. By end-December 2021, Kenya will issue a Eurobond to provide financing for the FY2021/22 budget. This financing was previously programmed for early 2022. By the end of June 2022, the country will issue another Eurobond to repay in full or in part the bond maturing in 2024.

Yatani said Kenya’s foreign exchange reserves were bolstered by significant inflows in the […]

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