Airline default pushes Kenya to repay $525 million US Exim loan

Kenya will take over the payment of a $525 million US Export-Import Bank loan it guaranteed for Kenya Airways Plc, after the flagship carrier failed to meet its repayment obligations. 

The East African nation in 2017 guaranteed part of the $841.6 million 10-year facility the airline took to purchase seven aircraft and one engine. Kenya Airways halted payments as it ran into financial difficulty exacerbated by the Covid-19 pandemic, which led to the grounding of most global air travel.

The airline stopped remittances on the guaranteed and the non-guaranteed portions of the loan, the Treasury said in a report on its website Friday. “Following the default,” according to the report, the cabinet gave approvals to pay the loan arrears “and the loan balance to be novated to government.”

Kenya is looking at ways of easing the financial burden from struggling state-owned enterprises, including restructuring their liabilities. Kenya Airways plans to return to profitability in 2024 after overhauling its operations.

The repayments shall be recovered through a subsidiary agreement between the government and the airline. Kenya holds a 48.9% stake in the carrier.