Kenya Airways: Paris Club Agreement on Debt Restructuring
Under arrangements agreed in Paris in January 1994 between the Government
of Kenya and a number of donor countries (the "Paris Club") certain debts
of the Government were rescheduled, including the debts of parastatals
for which the Government was responsible under guarantees it had issued
to creditors. The financing of Kenya Airways' purchase of two A310s
and three Fokker 50s airplanes in the late 1980s was included in the rescheduling.
Both Kenya Airways and the Government had defaulted on repayments under
the loan and guarantee arrangements for these aircraft partly as a result
of the devaluation of the Kenya Shilling and because of the recession in
the world airline industry in the early 1990s. The situation threatened
to cause the collapse of Kenya Airways. However, it was considered
important to the national interest that Kenya Airways continue to operate.
The Paris Club agreed to reschedule some of the Government's debts and
the creditors agreed to release Kenya Airways from its obligations to them
for arrears on its loans incurred up to 31 December 1993 in return for
the Government assuming responsibility as primary debtor for an amount
in foreign currencies equivalent to KShs. 4,294,149,00 in place of its
former role as guarantor.