Parliament has approved a Sh77.3 billion ($750 million) loan guarantee for Kenya Airways #ticker:KQ, handing a major boost to ongoing attempts to revive the ailing national carrier.
The MPs Thursday approved recommendations by the Finance, Trade and Planning Committee that will see the government guarantee $750 million in support of the restructuring of Kenya Airways.
“Pursuant to the provisions of Article 213 of the Constitution, and sections 50 and 58 of the Public Finance Management Act (CAP 412C), this House notes Sessional Paper No. 3 of 2017 on government guarantee in support of restructuring of Kenya Airways, and approves the Government of Kenya guarantee of $ 750 million, to the US Exim Bank and 11 local banks, for the restructuring of Kenya Airways PLC,” Aden Duale, Leader of Majority, said in the Motion.
The MPs decision will see the Treasury guarantee long-term loans that KQ owes the US Exim Bank ($525 million) and local lenders ($225 million).
These guarantees are being made in exchange for “material concessions” that include an extension of debt tenors, which will improve the airline’s repayment obligations.
Under the arrangement, the government will convert its existing loans in Kenya Airways amounting $243 million debt plus accrued interest into equity.
The Kenyan government owns 29.8 per cent of KQ while KLM owns 26.7 of the loss-making airline.
Treasury secretary Henry Rotich and former Kenya Airways managing director Mbuvi Ngunze rushed to Parliament on Wednesday evening to salvage the sessional paper guaranteeing KQ the loan after the Finance Committee failed to agree on its legality.
The committee, chaired by Ainamoi MP Benjamin Lang’at, said it could not ask Parliament to authorise the deal until the legality of using leased assets (planes) to guarantee debts the airline owes foreign and local banks was determined.