KQ picks Afreximbank to arrange $1.9b planes purchase
Posted Monday, June 25 2012 at 19:12
Kenya Airways has appointed the African Export-Import Bank (Afreximbank) as the lead arranger as the airline seeks to borrow $1.9 billion to finance the acquisition of 20 planes in the next two years.
The airline said on Monday that the loan facility would be used to cover pre-delivery and aircraft delivery costs for 9 new Boeing Dreamliners ,one Boeing 777-300 and 10 Embraer E190.
Afreximbank as the lead arranger, will be in charge of the fund-raising process where other banks can contribute to the pool to raise the $1.9 billion loan.
“Out of the total funds $1.6billion will go towards financing aircraft delivery costs and will be repaid in 10 years, while $300million will be used to make pre-delivery payments and this loan will be repaid in seven years,” Alex Mbugua, the Company’s Finance Director said.
Plane Manufacturers demand that airlines make pre-delivery costs of between 20-30 per cent of the actual Value of the plane as at least 24 months before the actual delivery of a plane.
In its 10-year plan dubbed project Mawingu, the airline had indicated it would need $3.6 billion over the next four years to support the acquisition of an additional 30 planes and the introduction of 45 new destinations.
Of the $3.6billion, $2.8billion will be used to meet pre-delivery and aircraft delivery costs over the next four years.
The news comes barely a month after the airline-26 per cent owned by KLM and 29 per cent by the Kenyan Government- raised Ksh14.5billion ($173million) in a rights issue, against a target of $250million.
The airline is said to be considering borrowing to bridge the shortfall from the rights issue-which achieved a subscription rate of 70 per cent with the two main shareholders and the International Finance Corporation(IFC) taking up 6o per cent of the rights.
The African Export-Import Bank (Afreximbank) is owned by African governments, private institutions and Non-African Banks.
The bank focuses on providing private sector loans, guarantees and advisory services