Companies
Inside Sh11bn KQ loan deal with government
Monday April 19 2021
Summary
- The airline took the debt in two tranches of Sh5 billion followed by Sh6 billion.
- The Sh5 billion loan has a concessional interest rate of three percent per annum – less than a quarter of the rate charged by commercial banks — and matures in five years.
- The carrier will pay an interest of Sh150 million per year on the loan or a total of Sh750 million over the five years.
Kenya Airways #ticker:KQ has revealed the terms of an Sh11 billion loan it took from the government in the year ended December to fund its operations at a time the Covid-19 pandemic had hurt its cash flows.
The airline took the debt in two tranches of Sh5 billion followed by Sh6 billion.
The Sh5 billion loan has a concessional interest rate of three percent per annum – less than a quarter of the rate charged by commercial banks — and matures in five years.
The carrier will pay an interest of Sh150 million per year on the loan or a total of Sh750 million over the five years. The repayment of the principal is expected at the end of the five years.
A loan of a similar size would cost Sh650 million per annum or a total of Sh3.2 billion in five years based on the 13 percent interest rate currently charged by most commercial banks.
“The first loan of Sh5 billion was to facilitate E-190 aircraft fleet engine overhauls that were due in 2020,” the national carrier says in its latest annual report.
“As part of government commitments to support the airline’s resumption of operations following the impact of Covid-19 pandemic, a second loan of Sh6 billion was advanced in the year and its terms are yet to be finalised.”
The government was the only entity that provided new loans to the company in the review period, indicating the critical role the State has played in…