Entry Instance

HTTP 200 OK
Allow: GET, PUT, PATCH, DELETE, HEAD, OPTIONS
Content-Type: application/json
Vary: Accept

{
    "id": 752482,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/752482/?format=api",
    "text_counter": 186,
    "type": "speech",
    "speaker_name": "Hon. Gaichuhie",
    "speaker_title": "",
    "speaker": {
        "id": 17,
        "legal_name": "Nelson Ributhi Gaichuhie",
        "slug": "nelson-gaichuhie"
    },
    "content": "2017 on Government Guarantee in support of Restructuring of Kenya Airways and approves the Government of Kenya Guarantee of United States Dollars ($) 750 million, equivalent to Kshs5.26 billion at the current exchange rate, to the US Exim Bank and eleven (11) local banks, for the restructuring of Kenya Airways PLC. This is the amended version. On 7th June, the Leader of the Majority Party tabled Sessional Paper No.3 of 2017 on the guarantee of US$750 million equivalent to Kshs77.48 billion in support of the restructuring of Kenya Airways (KQ). He further gave Notice of a Motion and it was referred to the Departmental Committee on Finance, Planning and Trade. We made considerations pursuant to Section 58 of the Public Finance Management (PFM) Act of 2012. When we got this, we called Kenya Airways and the National Treasury. We met at Radisson Blue Hotel on 9th and 13th of June. The Committee heard the following: 1. The loan is for a capital project; 2. The borrower is capable of repaying the loan; 3. In the case of private borrower, there is sufficient security on the loan; 4. The financial position of the borrower over the medium term is likely to be satisfactory; 5. The terms of the guarantee comply with the fiscal responsibility; 6. The amount guaranteed does not exceed the limit; 7. The draft guarantee document has been approved by the resolution of both Houses; and 8. The loan is also made according to the provisions of this Act and the regulations made thereunder. The gist of the Sessional Paper was to see that Kenya Airways in the next 15 years has the highest growth recorded between 2011 and 2015. During the period, the aircraft fleet increased from 32 to 45. Hon. Speaker, this is very important. I cannot rush a few things. The fleet had grown from 32 to 45. The purchase of those planes was financed through loans obtained from Citibank, JP Morgan, through a special purpose vehicle which is known as Savoy Air Services LLC and a liability to the leaser. The loan was guaranteed by the Export Import (EXIM) Bank of the United States of America. Kenya Airways financed the pre-delivery payments of the planes. Due to the dynamics in 2012 in the airline industry, it started experiencing a downturn. Under the proposed financial restructuring, the Government of Kenya (GOK) will convert the debt of Kshs244 million plus accrued interest to equity. The GoK will also provide a guarantee amounting to Kshs750 million to cover both the USA EXIM Bank and the local banks to the tune of Kshs525 million and Kshs225 million respectively. This guarantee has contingent liability required to secure the financing of KQ which has the ability to continue and maintain certain capital assets - principally the aircraft. It is also important to note that Kenya Airways restructured and is back to financial stability. If we guarantee this loan, they will be financially stable and will be able to continue. The independent third party has also supported the restructuring proposal of Kenya Airways according to the transaction advisers. The current and total contingent liabilities of the Government of Kenya in respect of the PFM Act Section 58(2)(f) amounts to Kshs57.6 billion and the proposed guarantee is Kshs77.4 billion, which is an aggregate of Ksh135.16 billion. This is supposed to be translated to shares. If Kenya Airways is guaranteed, looking at the reports, they will be able to turn around. The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}