May 7, 2020
By Edward Taylor and Arno Schuetze
FRANKFURT (Reuters) – Lufthansa <LHAG.DE> is negotiating a 9 billion euro ($9.71 billion) bailout with Germany’s economic stabilisation fund to ensure its future, the airline said on Thursday, confirming an earlier Reuters report.
The “stabilisation package” includes a non-voting capital component, known as a so-called silent participation, a secured loan, and a capital increase which may leave the government with a shareholding of up to 25% plus one share, the company said.
“The Executive Board of Deutsche Lufthansa AG is continuing negotiations with the aim of ensuring the future viability of the company for the benefit of its customers and employees,” the company said in a regulatory statement.
Various alternatives of a capital increase are being discussed, including an increase at the nominal value of the share, if necessary after a capital cut, Lufthansa added.
The nominal value of Lufthansa’s shares is 2.56 euros. A 25% stake would cost less than 500 million euros at this price. If Lufthansa opted for a capital cut that would enable the state to buy the 25% stake for an even smaller amount.
Lufthansa shares closed up 0.5% at 7.86 euros on Thursday.
The low price of the new shares issued to the state would enable Germany to sell its stake fast and for a profit — once Lufthansa has stabilised.
SWIFT EXIT
European Union bailout rules, which are being drafted in Brussels, are expected to ask for a swift exit of the state, one of the people close to the matter said, adding getting an EU nod for the bailout was not a formality.
Lufthansa’s management, however, is lobbying against the government taking a direct stake and has gotten political support from Angela Merkel’s ruling conservative party.
“The negotiations and the process of political decision-making are still ongoing”, Lufthansa said.
According to people close to the matter, Germany is offering roughly 5 billion euros in non-voting capital as part of the bailout. Additionally, Germany is offering about 3.5 billion euros in state-backed loans.
Switzerland, Austria and Belgium, where Lufthansa has important subsidiaries, have also offered help. Some of these contributions may lower the share that Germany is putting up in the bailout, the people said.
As a condition of the rescue, Lufthansa may have to waive future dividend payments and provide supervisory board representation for members of Germany’s stabilisation fund, the company said.
Last month Reuters reported that the airline group was seeking a 9 billion euro rescue package after travel bans to curb the spread of the novel coronavirus grounded 700 of its aircraft, leading to a 99% drop in passenger numbers.
(Reporting by Edward Taylor and Arno Schuetze, Editing by Madeline Chambers and Emelia Sithole-Matarise)
