The government has granted Kenya Airways (KQ) a 12-month break on servicing Sh41.27 billion worth of loans, offering a reprieve to the airline that had defaulted on payments.
The national carrier says in the latest annual report that it had accrued Sh1.8 billion in interest, prompting it to seek a waiver and deferral on unpaid interest and shareholder loans.
“As of December 31, 2022, the group and company had not made payments of interest on the government of Kenya loans as set out in the loan agreements,” says Kenya Airways.
“The government of Kenya granted the company a deferral of payment of interest on the loans until December 2023.”
The waiver and deferral on the loan will help KQ protect its cash as it continues to recover from the coronavirus-induced economic meltdown with eyes on posting a profit next year—the first since 2012.
The move comes as the KQ loans from the government hit Sh41.27 billion at the end of December last year from Sh25 billion at the end of 2021.
The government, which is the principal shareholder with a 48.9 percent stake, last year advanced KQ Sh16.27 billion as part of its commitment to support the airline’s resumption following the impact of Covid-19 pandemic.
The Treasury gave KQ a Sh11 billion bailout in 2020, months after the suspension of international and domestic flights. The carrier received the second batch of Sh14 billion in 2021.
The loans attract an annual interest at the rate of three percent, which should be paid by the 20th of June over five years
The loans were to enable KQ to recover from the impact of Covid-19 such as reduced passenger numbers and trips. The loan was also to support KQ in its restructuring programme.
Total debt for the carrier hit Sh139.25 billion in the year ended December, up from Sh107.09 billion the year before. Out of the combined debt, Sh39.09 billion is repayable within a year.
The government waiver however still leaves KQ with the headache of servicing Samburu Junior dollar-denominated loan amounting to Sh13.41 billion that has been classified as current after the airline defaulted on the terms.
KQ had defaulted on interest payment for the Sh62.48 billion Tsavo Financing LLC loan but the government rescued it by taking over the loan and paying out Sh2.8 billion towards interest.