Eight commercial banks have compelled the Treasury to settle a Ksh 19.3 billion (US$149.9 million) defaulted loan on behalf of Kenya Airways (KQ) after the airline failed to meet its repayment obligations.
The lenders, among them Equity Bank, NCBA, and Cooperative Bank, rejected a proposed 6.5-year bond and insist on immediate settlement in cash.
Treasury, which had guaranteed the loan, released the funds on January 3 without parliamentary approval. The payment later appeared in the supplementary budget, which is now before Parliament for review.
Treasury Cabinet Secretary John Mbadi informed Parliament that the amount will be recovered from KQ as a shareholder loan, with repayment terms yet to be finalized.
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Kenya Airways reported a first half-year profit in a decade but remains in a deep financial hole, with a negative equity of Ksh 123.6 billion.
The airline seeks to ease its debt burden through a debt-to-equity conversion and hopes to attract a strategic investor.
Lenders previously converted Ksh 21.6 billion of KQ’s debt into shares, giving them a 38.1 percent stake in the airline.
Treasury now holds 48.9 percent of KQ, making it the largest shareholder. Kenya Airways has struggled with heavy debt since 2013, despite an increase in passenger numbers and revenue growth.