Reports coming through from our neighbors reveals that Kenya Airways has defaulted on an $841.6 million loan from the American Exim Bank for the purchase of aircraft, the National Treasury has said.
According to the latest Annual Debt Management Report (2021/2022 fiscal year) that the loss-making national carrier secured the loan with security from the national government but failed to repay. Of the 841.6 million, the government guaranteed $525 million.
The National Treasury says. “Kenya Airways defaulted on both the guaranteed portion of the loan amount as well as the non-guaranteed portion,”
The National Government is in the process of novating the debt to be finalized during the 2022/2023 fiscal year.”
It should be noted that Novation is the process by which an original contract is extinguished and replaced with another, under which a third party takes up rights and obligations duplicating those of one of the parties to the original contract. This means that the original party transfers both the benefits and burdens under the contract. KQ’s loan from the Exim Bank of USA was meant to purchase seven aircraft and one engine.