Budget airline Jambojet tapped a Sh1.72 billion loan from NCBA Group in the financial year ended December 2024, to restructure leases and maintain aircraft engines.
Jambojet’s parent company Kenya Airways (KQ), which guaranteed the four-year loan, disclosed that the facility attracts an average interest rate of 18.5 percent per annum, pointing to the tight credit conditions that borrowers grappled with last year.
The airline spent the loan on prepayment of lease rental arrears worth Sh1.42 billion and the balance on funding the maintenance of aircraft engines.
Aircraft lease rentals refer to the cost an airline pays to rent or lease an aircraft from another company.
“The loan attracts interest at a base rate of 17.5 percent with a margin of one percent per annum. In the event of default, the loan will attract an additional interest rate of 2.5 percent per month,” says KQ in its latest annual report.
Established in 2014, Jambojet marked a decade in operation last year and has promised to expand its routes. It runs daily flights between Nairobi and other cities and towns such as Mombasa, Kisumu, Eldoret, Malindi, Diani and Lamu.
The loan from NCBA was secured with a Sh2 billion corporate guarantee from KQ, providing assurance that the national carrier would step in to pay the loan should the subsidiary default.
In addition, the loan was secured by a Sh1.08 billion insurance from Africa Special Risks Limited and a cash cover of Sh150 million.
Between February and August, the central bank rate (CBR) remained at a 22-year high of 13 percent, prompting many lenders to increase interest rates. Borrowing conditions were also tightened borrowing conditions as defaults soared, closing the year at Sh672.6 billion or 16.4 percent of the loan book.
NCBA is one of KQ’s principal bankers alongside Citibank NA, Standard Chartered Bank Limited, KCB Bank Kenya and Equity Bank Kenya.
The issuance of the loan extends NCBA ties with KQ. NCBA was among the consortium of lenders whose $175 million (Sh22.61 billion) credit facility was restructured in November 2017 into equity that gave the lenders a 38.1 percent stake in the airline.
Apart from NCBA, the $175 million was drawn from Equity Bank, KCB Bank Kenya, I&M Bank, National Bank of Kenya Limited, Co-operative Bank of Kenya, Diamond Trust Bank Kenya Limited and Ecobank Limited for financing of working capital requirements.
The banks had also issued to KQ letters of credit worth $149.9 million, which they forced the government to settle in January this year after they rejected an offer to recover the defaulted debt through a 6.5-year bond.
The Treasury had to issue a supplementary budget to settle the amount, which will be included in KQ books as a shareholder loan. The terms of the loan are to be negotiated and finalised by the end of June.
