Kenya Airways= Loses Because Of Aircraft Lease Charges-Who Owns The Aircraft?

[Nowayhaha]

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Embraer Jets, Boeing 787 and 737-NG are owned by Tsavo Limited, Samburu Limited and Amboseli Limited , all registered in offshore companies located cayman islands .
 Bottomline the Government has been bailing out KQ since 2012 for an average 20 billions  which essentially goes back to pay lease charges meaning ending up  in the aforementioned companies. Now that it has become untenable the government has decided to " nationalize" the company simply meaning instead of bailing out the company every year it would officialize paying lease charges to Tsavo, Samburu and Amboseli.

 

[Kadudu]

Very simple answer. Kenyatta family. Those deals were signed when Wanjohi was finance minister.

[Nowayhaha]

Very simple answer. Kenyatta family. Those deals were signed when Wanjohi was finance minister.

The deals eat a big chunk of KQ revenues , In short here is the break down
Taking example of  last financial year
KQ generated 129 Billion Shillings in revenue
Lease of A/C charges is around  82 Billion KSHS
Fuel Costs around 33 Billion KSHS
Suppliers paid 20 Billion KSHS
Salaries  take up around 12 Billion
Total around 147 Billion KSHS  out of 129 Billion KSHS generated

The lease charges are around roughly at minimum Twice the market rate i.e. in KQs case the correct lease charges should be around 40 Billion meaning KQ would still be profitable company ( would have made a profit of 22 Billion KSHS) Instead its the Leasing companies (Tsavo+Amboseli+Samburu taking away 40 Billion )
 
Tsavo+Amboseli+Samburu are offshore companies and  no one knows their directors - They are what are called special purpose vehicles - Where Owners of such companies take loan in this case from standard charter and Afro Exim  , guarantee the loan (one has to have big money)  then buy the A/Cs using loan money  in this case ERJ Jets + Boeing 787 & Boeing T37 NG) then lease the A/Cs to airlines at  exuberant fees ( in KQ case twice as much the market price ) , The company makes its money by being paid monthly lease fees pay the loan and pocket the change  ( Big Money)

Now who are the directors /owners of  Tsavo+Amboseli+Samburu ???

[RV Pundit]

In a statement to the newsroom, KQ Managing Director Titus Naikuni said the two firms, Samburu Limited and Amboseli Limited based in Cayman Islands, were incorporated by the airline’s lenders Standard Chartered Bank and the African Export Import Bank (Afriexim)

[RV Pundit]

Wacheni Fitina.

If you want to hide - you cannot call them Samburu, Tsavo and etc. Previously they had Simba.

The offshore companies are owned by KQ lenders  - StanChart and Afriexim.

https://www.capitalfm.co.ke/business/2012/11/kq-denies-racket-in-aircraft-purchase-deal/

[Nowayhaha]

Wacheni Fitina.

If you want to hide - you cannot call them Samburu, Tsavo and etc. Previously they had Simba.

The offshore companies are owned by KQ lenders  - StanChart and Afriexim.

https://www.capitalfm.co.ke/business/2012/11/kq-denies-racket-in-aircraft-purchase-deal/

Come on RV , you are better than this , Banks are in the business of giving out loans and not owning companies especially aviation related companies  .

from the link you provided - Reread the statement carefully . Simba scheme  too was the same scam and it seems the " unknown businessmen " learnt from it and decided to go from 4 Aircraft to more than 25 Aircrafts . Pray tell me why the 4 A/Cs 2 were sold at throw away price and 2 were converted to cargo aircraft after lease came to an end .

In the scheme one need to have enough money to act as a guarantor ,  get the big loans and buy the A/Cs -( Standard charter and AfroExim do not own any aircrafts they would even dare )  then lease the A/Cs in this case to KQ -If you notice KQ started making loses from 2013 and the treasury has been bailing KQ out every year at an average of 20 Billion Kshs with direct instructions from the Government . All over a sudden when it has become apparent there will be a change of rule in 2022 , The government want to nationalize the airline you know why ? The is no guarantee that the bailout will continue post 2022 with a new regime , why not nationalize and the Government will be compelled by law to continue paying the lease charges .

Otherwise if you want to know the real owners , let KQ close the company , the banks Afroexim and standard Charter will go for their loan money from guarantors and that where you will see the real owners of the A/Cs .   

In a statement to the newsroom, KQ Managing Director Titus Naikuni said the two firms, Samburu Limited and Amboseli Limited based in Cayman Islands, were incorporated by the airline’s lenders Standard Chartered Bank and the African Export Import Bank (Afriexim) as part of a financing agreement to purchase 10 new Embraer ERJ-190 from South America.

“In such financing agreements the companies are commonly referred to as special purpose vehicles (SPVs). The two companies will remain the transitory owners of the brand new aircrafts currently being purchased by Kenya Airways until the loans are fully paid to the lenders,” said Naikuni.

[RV Pundit]

I know US's Exim bank and others - loaned KQ to buy Boeing planes - about 70B kshs - for purchase of those flights.

This is not CMC - offshore thing - by NJonjo and company - I hope.

Otherwise US would come hard of anyone.

Wacheni Fitina.

If you want to hide - you cannot call them Samburu, Tsavo and etc. Previously they had Simba.

The offshore companies are owned by KQ lenders  - StanChart and Afriexim.

https://www.capitalfm.co.ke/business/2012/11/kq-denies-racket-in-aircraft-purchase-deal/

Come on RV , you are better than this , Banks are in the business of giving out loans and not owning companies especially aviation related companies  .

from the link you provided - Reread the statement carefully . Simba scheme  too was the same scam and it seems the " unknown businessmen " learnt from it and decided to go from 4 Aircraft to more than 25 Aircrafts . Pray tell me why the 4 A/Cs 2 were sold at throw away price and 2 were converted to cargo aircraft after lease came to an end .

In the scheme one need to have enough money to act as a guarantor ,  get the big loans and buy the A/Cs -( Standard charter and AfroExim do not own any aircrafts they would even dare )  then lease the A/Cs in this case to KQ -If you notice KQ started making loses from 2013 and the treasury has been bailing KQ out every year at an average of 20 Billion Kshs with direct instructions from the Government . All over a sudden when it has become apparent there will be a change of rule in 2022 , The government want to nationalize the airline you know why ? The is no guarantee that the bailout will continue post 2022 with a new regime , why not nationalize and the Government will be compelled by law to continue paying the lease charges .

Otherwise if you want to know the real owners , let KQ close the company , the banks Afroexim and standard Charter will go for their loan money from guarantors and that where you will see the real owners of the A/Cs .   

In a statement to the newsroom, KQ Managing Director Titus Naikuni said the two firms, Samburu Limited and Amboseli Limited based in Cayman Islands, were incorporated by the airline’s lenders Standard Chartered Bank and the African Export Import Bank (Afriexim) as part of a financing agreement to purchase 10 new Embraer ERJ-190 from South America.

“In such financing agreements the companies are commonly referred to as special purpose vehicles (SPVs). The two companies will remain the transitory owners of the brand new aircrafts currently being purchased by Kenya Airways until the loans are fully paid to the lenders,” said Naikuni.

[Kadudu]

Kenya parliament even tried to probe the leasing deal of KQ and was stopped even before the motion started. The offshore companies are conduits for local owners. Otherwise there are several international companies that lease planes to airlines. KQ would not have needed to go far to some unknown offshore companies clearly only created for only one purpose, that is to loan planes to KQ.

I know US's Exim bank and others - loaned KQ to buy Boeing planes - about 70B kshs - for purchase of those flights.

This is not CMC - offshore thing - by NJonjo and company - I hope.

Otherwise US would come hard of anyone.

[RV Pundit]

But this was created by the Banks themselves. I don't see any fire or smoke here.

Kenya parliament even tried to probe the leasing deal of KQ and was stopped even before the motion started. The offshore companies are conduits for local owners. Otherwise there are several international companies that lease planes to airlines. KQ would not have needed to go far to some unknown offshore companies clearly only created for only one purpose, that is to loan planes to KQ.

[Kadudu]

Banks do not create offshore companies to lease aircraft to local airlines. Then banks might as well create offshore companies for mortages.
As I wrote before, there are companies that specialiase in leasing of aircrafts. There was no reason for KQ to lease aircrafts from thos offshore companies. Also some of the aircrafts were later leased to other airlines at a lower rate than KQ was leasing. What sense does that make?

But this was created by the Banks themselves. I don't see any fire or smoke here.

[RV Pundit]

You don't get. Banks bought the planes on behalf of KQ. They are "leasing" it to KQ until they make the final loan repayment.

Banks do not create offshore companies to lease aircraft to local airlines. Then banks might as well create offshore companies for mortages.
As I wrote before, there are companies that specialiase in leasing of aircrafts. There was no reason for KQ to lease aircrafts from thos offshore companies. Also some of the aircrafts were later leased to other airlines at a lower rate than KQ was leasing. What sense does that make?

But this was created by the Banks themselves. I don't see any fire or smoke here.

[Njuri Ncheke]

Employees are really suffering its no joke, the drunkard Uhuru needs to act fast and decisively,

[Nowayhaha]

You don't get. Banks bought the planes on behalf of KQ. They are "leasing" it to KQ until they make the final loan repayment.

Banks do not create offshore companies to lease aircraft to local airlines. Then banks might as well create offshore companies for mortages.
As I wrote before, there are companies that specialiase in leasing of aircrafts. There was no reason for KQ to lease aircrafts from thos offshore companies. Also some of the aircrafts were later leased to other airlines at a lower rate than KQ was leasing. What sense does that make?

But this was created by the Banks themselves. I don't see any fire or smoke here.

Rv Pundit, Kadudu knows what she is talking about. For once she is right
Refer to below it will give you an insight of A/C financing.



https://www.lexology.com/library/detail.aspx?g=4e48c85e-27cb-4157-8a7e-24b2eeee7faf

An innovative solution for securing aircraft financing: Insurance-backed financing models

Turkey September 2 2019

As government-backed credits extended by US Ex-Im Bank and European export credit agencies (“ECA”) for aircraft financing have diminished, Marsh Group, a globally leading insurance broker acting as an aircraft broker in the aviation sector, has developed an insurance-backed aircraft financing product named Aircraft Finance Insurance Consortium1 (“AFIC”) with Boeing and subsequently another product named Balthazar with Airbus. BNP Paribas, a leading bank in aviation financing, offered financing in the amount of up to USD 225 million for five Airbus A321 NEO aircrafts to be delivered to Turkish Airlines in 2019 using the Balthazar model!2

The demand for air travel has been on the rise in Turkey since 2002.3 The increase is only expected to go up as the cost of air travel continues to decrease for the average customer, together with the opening of the new and higher-capacity İstanbul Airport set to become a global aviation hub. Despite the increasing demand for air travel, the total number of aircrafts in the Turkish airline companies’ fleets decreased rather sharply in 2017 due to the downsizing policies of some of these companies and remained nearly the same in 2018. 

One reason for this disparity is presumably the difficulty of securing financing for aircrafts, partially due to diminishing support from ECAs4 for aircraft companies over the past few years. In the face of these difficulties, the insurance sector has filled the gap created by these governmentbacked credits provided by ECAs. A leading global insurance company, Marsh Group, has developed an insurance-backed aircraft financing product named Aircraft Finance Insurance Consortium (“AFIC”) specifically for US based Boeing aircrafts.

AFIC is reported to having financed approximately USD 3.5 billion of assets for eight airlines and two aircraft leasing companies since March 2017.5 Later on, Marsh Group issued a similar product with Airbus to ease aircraft financing named “Balthazar”, which was first used by Turkish Airlines recently. BNP Paribas, one of the leading banks in aviation financing, is said to provide financing in the amount of up to USD 225 million for five Airbus A321 NEO aircrafts to be delivered to Turkish Airlines in 2019 using the Balthazar model.

The Structure

The financing structure of insurance backed financing is similar to ECA-backed financing models in many ways. A simple outline of the typical structure can be summarized as follows:

Loan phase

• Incorporation of a Special Purpose Vehicle (“SPV”) by an airline company –this reduces the risk for the lenders as they would rather have an independent legal personality as the borrower, free from any financial distress that may be experienced by the airline company.

• Financing documents – similar to any ECA backed financing, the key finance documents will include a loan agreement between the SPV and lenders, an intercreditor agreement, and agreements covering the security package generally consisting of an aircraft mortgage, share pledge, assignment of receivables, and others based on the particularities of the deal.

Insurance phase

• Non-payment Insurance (“NPI”) – this is the key component of insurance backed aircraft financing. The SPV or parent company procures an NPI to be provided by a group of insurers in favor of the lenders. The group of insurers will then appoint an insurer representative to oversee coordination between the insurers and the lenders. The NPI mechanism will work as follows: 

-If the SPV (as the borrower) fails to make the required payments to the lenders, the insurers will step-in and make the scheduled payments in lieu of the SPV;

-The content of the insurance policy can be negotiated between the parties to provide sufficient comfort to the lenders and insurers as well as the borrower and minimize the potential risks of the lenders (e.g. events of default);

-The insurance would cover 100% of the loan; and з The insurance premium may be paid in installments or in a lump sum by the SPV since it is also possible to finance the premium with the loan extended by the lenders. 

Acquisition of aircrafts

• Extension of Loans and the Acquisition of Aircrafts – The lenders extend a loan to the SPV to finance the aircraft acquisition. Once the SPV acquires the aircraft, it leases the aircraft to the parent airline company.

• Repayment – The SPV uses the lease proceeds it receives from the parent airline company to pay the lenders.

• Event of Default - Upon occurrence of a continuing event of default, the insurance policy kicks in and the insurance companies will start to pay the lenders. It is worth noting that each insurer would be liable for a certain share of the loan. In line with the principles of the insurance law applicable to the insurance policy, insurers would become the successors of the lenders for the payment they have made. In other words, the insurers would replace the lenders for the portion of the payment they made, being able to use the rights that the lenders would have upon occurrence of an event of default (e.g. foreclosing the securities).

An Ideal Scheme for the Lenders

This structure is beneficial to the lenders as they shift all major risks to insurance companies. For instance, the lenders would be satisfied directly by a group of highly-rated insurance companies in cash instead of dealing with the – sometimes overly cumbersome - procedure of foreclosing the securities provided by the SPV. Another benefit of the structure for the lender comes from the incorporation of the SPV, creating a financially stable borrower remote from the risk of bankruptcy.

The structure also benefits the airline company and the aircraft manufacturer by making it easier for them to convince lenders to provide financing with the confidence brought by the insurance companies. The cost of financing is expected to be lowered by reducing the risk of non-payment significantly through 100% insurance coverage and confidence brought by the insurance companies. 

The structure is similar to ECA-backed financing models. The main differences stem from the private sector insurance companies replacing the ECAs. Among others, this means that non-commercial constraints (such as domestic content thresholds) put by the ECAs will not be applicable. 

The structure also benefits the airline company and the aircraft manufacturer by making it easier for them to convince lenders to provide financing with the confidence brought by the insurance companies. The cost of financing is expected to be lowered by reducing the risk of non-payment significantly through 100% insurance coverage and confidence brought by the insurance companies. 

As for the insurance companies, the insurance-backed financing models provide another way for insurance companies to benefit from the available seats in the aviation sector by participating in aircraft financing transactions in addition to conventional aviation insurances. These models are appealing to insurance companies that would like to take part in and capitalize on aircraft financing transactions involving high-risk and requiring large amounts of financing. 

Turkish Law Perspective

In principle, there are two fundamental aspects to the deal structure that must be evaluated from a Turkish law perspective: first, the conventional security package to be provided to the lenders, which is currently dealt with as established practice in Turkey. The second and most characterizing aspect of the deal is the insurance policy. One of the main roles of Turkish lawyers is to ensure that the insurance policy is enforceable in Turkey, as the insurance company may need to enforce the insurance policy to collect the insurance premia or to retrieve the payments it made in lieu of the SPV. 

A Prospect for the Future

Even though the recent accidents that took place involving the Boeing 737 Max aircrafts and the technical errors associated with the said craft may have slowed down Boeing craft related financing, the addition of the insurancebacked financing models seem to be more than welcomed by the aviation sector around the world including Turkey. 

[Nowayhaha]

https://nairobilawmonthly.com/index.php/2015/06/10/kq-the-plight-of-africa/

In fact, one famous political family in the country, NLM established, could be holding significant interests in not only the firm but most of the KQ’s lenders.

The investigations uncovered that the genesis of the extreme turbulence KQ is experiencing could be traced back to Anglo Leasing-type deals when top management and senior government officials formed special purpose vehicles (SPVs) to fleece the carrier.

Majority of these SPVs were incorporated in tax havens like the Cayman Islands, and through a complex web of transactions were buying and selling, or leasing to KQ aircraft at mind-boggling fees.

As such, the SPVs have, in essence, have continued to strangle the national carrier in a complex web that KQ cannot and will not easily get out from, unless something more radical happens.

Media blackmail

Most of these SPVs were incorporated during the former CEO Titus Naikuni’s era, and Ngunze, who took over from Naikuni, was a high-ranking official at KQ.

Kenya’s local media attempt’s at disclosing these deals have been met with specific threats to journalists as well as the KQ executives withdrawing their adverts, at least until they play along.

In the early and mid-2000’s, KQ wanted to buy a new fleet of Embraer, the Brazilian-manufactured mid-range, aircraft, but could not make the down payment for the planes to the manufacturer. It thus borrowed money from some financiers to make the down payment.

In order to borrow the funds for the down payment, KQ transferred the purchase agreement for the fleet of planes to a new company that would become a borrower proxy for KQ.

According to the documents in possession of NLM, the borrower was Amboseli Limited, a special purpose company that was registered in the Cayman Islands. Amboseli Ltd was structured so that should it go into bankruptcy then KQ was to be at arm’s length – thus the phrase Bankruptcy Remote Orphan (BRO).

An orphan structure is a financing term referring to a company whose shares are held by a trustee on a non-charitable purpose trust. The company is said to be an “orphan” as it is not beneficially owned by anyone. Orphan structures are usually used in offshore structures to ensure that the assets and liabilities of the subject company (in this case Amboseli Ltd) are treated as “off-balance-sheet” with respect to the sponsor of the structure (in this case Kenya Airways).

Other reasons for creating an orphan structure are to avoid or minimise regulation which might otherwise apply to a structure, and to ensure that the company is “bankruptcy remote” from companies in the same group as the sponsor. Orphan structures are relatively common features of securitisation vehicles, where the asset backed bonds are issued by the orphan company (Amboseli Limited).

Shares in Amboseli Limited were to be held in trust for the benefit of whoever is putting up the money for the aircraft purchase. The trustee of all the shares in Amboseli Ltd was yet another special purpose vehicle called Walkers SPV (special purpose vehicle).

In the agreement, Amboseli Ltd was to use the purchase agreement signed by KQ with the manufacturer of the Embraer aircraft to approach unidentified lenders who would advance the funds necessary for payment and delivery of each plane until the fleet is bought entirely.

The terms of this agreement was that KQ would pay to Amboseli Ltd the sum of Manufacturers price plus Amboseli Limited’s “running costs” plus interest owed to the lenders engaged by Amboseli Ltd.

KQ was to repay Amboseli Ltd in instalments in the course of 12 years, according to March 2014 annual report, and each instalment is called a borrower’s contribution.

The borrower’s contribution is due from KQ whenever Amboseli Ltd is due to make an interest payment on the loan. In each instalment KQ pays the sum of: The interest due to be paid to the lender by Amboseli Ltd plus Amboseli Ltd’s running costs.

On the delivery date of the aircraft, KQ was to pay Amboseli Ltd the Balance of the purchase price. This means Amboseli Ltd would, on the same delivery date, pay the balance of the purchase price to the manufacturer, plus repay the lender for the particular aircraft.

In the structure, KQ would only take delivery, not title (the real proof of ownership), of each delivered aircraft. Amboseli Ltd was to deliver the title to another company called Samburu Limited “to whom the Delivery Facility is made by the long term lenders.”

From the chart in the documents in possession of NLM, the immediate questions were (1) where is Samburu Limited placed on the chart? (2) Who is the facilitating agent referred to on page 1 (paragraph c) of the document?

As at March 31, 2014, the KQ had 47 aircraft, either owned or on operating leases, according to KQ’s annual report. These comprised five Boeing 777 wide body jets, one Boeing 787, six Boeing 767 wide body jets, 13 Boeing 737 narrow body jets, 20 Embraer regional jets and two Boeing 737 freighters; formerly passenger aircraft, one converted to a freighter during the year, while the other had been converted the previous year.

Our attempts to get Ngunze, KQ’s CEO, who is officially the company spokesman, to respond to the specific questions were rebuffed, in a response couched to avoid at all any discussions on them.

.

[Nowayhaha]

Part 1

[Nowayhaha]

Part 2

[Nowayhaha]

Part 3

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Part 4

[Nowayhaha]

RV here is the evidence you were asking Njamba

[Nowayhaha]

Kadudu kuja hapa. Remember this ?