Kenya’s government will take over the payment of a $525 million US Export-Import Bank loan guaranteed for Kenya Airways (KQ) after the national carrier failed to meet its repayment obligations, Kenyan Wall Street Journal reported.

The lender of the loan is the US-based Private Export Funding Corporation (PEFCO) and guaranteed by Exim Bank of USA, which in turn was guaranteed by the Kenyan government.

In its latest Annual Debt Management Report FY2021/2022, the treasury stated that the government in 2017 guaranteed part of the $841.6 million 10-year facility running until FY2027/28 that the airline took to purchase seven aircraft and one engine.

However, the airline halted payments on the guaranteed and the non-guaranteed portions of the loan as it ran into financial difficulty aggravated by the COVID-19 pandemic.

Following the default, Kenya Airways approached the government. The cabinet gave approvals to pay the loan arrears on behalf of KQ, and the loan balance was to be novated to the government.

KQ is 48.9% owned by the government, while a group of 10 local banks owns 38.1%. 

Other shareholders include KLM Royal Dutch Airline (7.8%), employees (2.4%) and other shareholders at 2.8%, the newspaper said.

(Editing by Seban Scaria