Dar es Salaam. A Canadian export credit agency is suing a private Tanzanian airline, Precision Air, in the UK High Court over unsettled debt of nearly US$26 million that the airline took under an aircraft financing agreement, it has been revealed.
A report by the Global Trade Review, known simply as GTR, revealed that the lawsuit stems from a 2012 agreement between Export Development Canada (EDC) and Precision Air whereby the former provided direct financing enabling the aviation firm to purchase two model 42-600 jets from French-Italian manufacturer ATR.
The deal, GTR reports, involved a special-purpose vehicle, Antelope Leasing, which acted as the borrower and held the aircraft as collateral on behalf of EDC.
Precision Air was obliged to make rental payments for the aircraft. Reports indicate that the plane’s legal title was to be transferred to the airline once the loans were fully repaid.
“But as revealed in filings made to the UK High Court in December , the Tanzanian company defaulted on its payments to EDC under the lease facility and has ignored multiple requests to pay since 2021,” GTR reported.
EDC is seeking US$13 million under a leasing deal for the first aircraft, which covers unpaid rent of US$11.7 million and a termination sum of US$1.3 million.
EDC alleges that the second jet is due nearly US$11.3 million in unpaid rent and a termination payment of over US$1.6 million. In total, it aims to claw back about US$26 million, according to the GTR report.
GTR referred to Precision Air’s financial statement of September 2022, where the airline said the planes have largely been out of service and that it was in the process of “reviving the aircraft for returning to [the] lessor.”
“These aircraft have been grounded since 2017 due to technical issues, and they are not part of the active fleet,” Precision Air reportedly said.
An EDC spokesperson declined to comment when asked by GTR about the current location of the two ATR jets. “At this time, we are limited in what we can share,” they say.
Precision Air’s CEO and managing director, Patrick Mwanri, could not be reached for comment.
But GTR referred to Precision Air’s most recent financial statement, where the airline admits it had been “in breach” of the terms of loan agreements with EDC and other lenders due to “significant delays in repayments of principal and interest.”
These other lenders, GTR reports, include Citi and Finland’s development lender, Finnfund, from which Precision Air secured a US$127 million loan agreement in 2008.
Founded in 1993, Precision Air provides scheduled flight services to over ten destinations within and outside Tanzania from its main hub, Dar es Salaam. Apart from scheduled flights, the airline offers chartered and cargo air services.
On December 21, 2011, Precision Air became the first airline in Tanzania to list on the Dar es Salaam Stock Exchange with 7,056 investors who took part in the Initial Public Offering in November 2011.
On June 10, 2023, the founder of Precision Air, Michael Shirima, died at the Aga Khana Hospital in Dar es Salaam, where he received treatment. Shirima, a celebrated entrepreneur and businessman, died at 80.
The lawsuit will most likely add reputational pressure on Precision Air at a time when the airline is yet to recover from the reputational challenges it faced following the tragic accident on Lake Victoria on November 7, 2022, killing 19 people.
Already, a family of a British citizen who died in the accident has opened an inquest at the Ipswich Coroner’s Court in the UK, trying to establish the valid reason that led to the death of their loved one, 46-year-old and father of three, Jonathan Rose.
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