Lufthansa nears rescue deal

Bailout will make Germany carrier’s top shareholder

FRANKFURT: Deutsche Lufthansa AG said it’s close to a multi-billion euro bailout deal that would see the state become its biggest shareholder after the coronavirus punctured a decades-long boom in air travel.

Lufthansa confirmed in a statement it’s in advanced talks with Germany’s WSF Economic Stabilisation Fund for aid of as much as 9 billion euros (Us$9.9bil).

The package would include a 3 billion euro loan, a so-called silent participation and the WSF obtaining a 20% stake through a capital issuance, Lufthansa said.

The government would also receive a convertible bond equivalent to an additional 5% plus one share of the company’s increased capital.

Under German law, a 25% plus one share stake would enable the state to block motions at AGMS, giving it a veto over hostile takeover attempts.

“A decision can be expected shortly,” Chancellor Angela Merkel said in Berlin, adding that “intensive talks” were ongoing with the company and the European Commission, which would need to approve a deal.

She declined to go into details, saying: “I would give the advice: wait for the talks to end.”

Lufthansa also said two seats on its supervisory board are to be filled in agreement with the German government. It didn’t say whether these would be political or independent figures, a matter under discussion in negotiations.

If agreed, the deal outlined by Lufthansa would bring the curtain down on weeks of tense negotiations between the company and state officials.

It would also set the scene for a dramatic EGM at which shareholders will have to vote on whether to accept a package that would dilute their own stakes.

Lufthansa would issue the additional capital to the government for the nominal price of 2.56 euros, a steep discount that would allow the state to profit from any upside to the company’s share price.

The contours of a deal come after the airline warned in a letter that cash reserves continued to shrink while it negotiates the rescue package.

Lufthansa’s board said it hoped the government would find the “political will” for a deal that would keep the carrier competitive against international airlines.

“A decision can be expected shortly.” Angela Merkel