Treasury to restructure Kenya Airways' debts, again

Kenya Airways Cargo plane [Courtesy]

The government is set to restructure loans advanced to the national carrier Kenya Airways, yet again.

This could further increase the State’s shareholding in the airline while diluting other shareholders, including the consortium of banks whose loans were converted into equity in 2017.

KQ is in the process of being renationalised, with the National Aviation Management Bill now in Parliament, expected to give direction on how the process will be undertaken once it becomes law.

The acting Director General of Treasury’s Public Investments and Portfolio Management Directorate Stanley Kamau yesterday said the government was considering “restructuring the loans that KQ has, once again”.

In 2017 KQ 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.

Mr Kamau noted that despite KQ not being a parastatal, Treasury has been advancing it loans while writing off older debts.

He said it was in the interest of the government to have KQ continue operations due to its strategic role in the economy. The 2017 restructuring also involved the State guaranteeing the airline’s loans of $750 million (Sh81 billion) mostly to international lenders.

Should the carrier close shop, the creditors would collect their money from Treasury.

“KQ is not a parastatal… we own less than 50 per cent. We however have an interest in the airline for two reasons; one is because of the role it plays in the economy including tourism, agricultural exports as well as other industries… Nairobi cannot be a hub without an airline,” said Kamau when he spoke yesterday at a meeting with the press.

“The second reason is that in the 2017 restructuring, we guaranteed loans to the tune of $750 million (Sh75 billion).”

“So when KQ is in financial distress, we have an obligation as a government to come in and support it. We have already extended some support of Sh10 billion. This may not be adequate considering the airline’s financial position.”

While he did not specify when the Sh10 billion loan was advanced, Treasury in the supplementary budget for the current financial year said it would inject Sh26.5 billion into the airline in form of a shareholder convertible loan.