KQ debt swap reveals bank loans pricing

A KENYA AIRWAYS PLANE. FILE PHOTO | NMG 

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  By BD REPORTER
  

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  Summary

  • KCB’s
  Sh2 billion had the highest interest rate of 12.5 per cent, followed by National Bank of Kenya’s
• Sh3.5 billion at 11.22 per cent.
• Equity Bank
• , Commercial Bank of Africa and Ecobank all priced their respective loans of Sh5.1 billion, Sh3 billion and Sh824 million at 10 per cent.
• The Sh412 million that KQ, as the airline is known by its international code, owes Jamii Bora Bank has an interest rate of nine per cent, the same level as NIC Bank’s
Sh2 billion.

The ongoing Sh23 billion debt-to-equity swap discussions between Kenya Airways

and 11 local banks has revealed how each of the lenders priced their loans to the troubled airline.

Documents seen by the Business Daily show the interest rates charged by the banks diverged by up to 5.5 percentage points, indicating varying risk perceptions among the lenders.

READ: Debt swap deal wants banks to lend KQ Sh18bn

KCB’s Sh2 billion had the highest interest rate of 12.5 per cent, followed by National Bank of Kenya’s Sh3.5 billion at 11.22 per cent.

Equity Bank , Commercial Bank of Africa and Ecobank all priced their respective loans of Sh5.1 billion, Sh3 billion and Sh824 million at 10 per cent.

The Sh412 million that KQ, as the airline is known by its international code, owes Jamii Bora Bank has an interest rate of nine per cent, the same level as NIC Bank’s Sh2 billion.

Co-op Bank

priced its Sh3.3 billion loan at 8.83 per cent, followed by Diamond Trust Bank’s

Sh2 billion (at 8.5 per cent) and Chase Bank’s Sh721 million (8.25 per cent).

I&M, which lent KQ Sh824 million, offered the national carrier the lowest interest rate of seven per cent.

READ: KQ seeks court backing in debt swap war with banks

The lenders have been burnt by the airline’s default, with the carrier working on a restructuring plan that seeks to turn the banks into shareholders besides asking them to provide it with additional Sh18 billion credit facilities.

All the Sh23 billion debt was unsecured and the airline has failed to repay those which fell due between May 2016 and February this year. Others are to mature over the next few years, but the airline says the entire debt has to be restructured as it is unsustainable.

READ: KQ recovery plan faces banks challenge

The KQ debacle has exposed the risks in big-ticket lending, with a few companies defaulting on multibillion-shilling loans owed to several banks.

Nakumatt Holdings and the estate of the late tycoon Tahir Sheikh Said (TSS) are among the entities that have struggled to repay multibillion-shilling loans.