Germany stamps authority on Lufthansa with $9.8 billion lifeline
Germany threw Lufthansa a 9 billion euro ($9.8 billion)
lifeline on Monday, agreeing a bailout which gives Berlin a veto in the event
of a hostile bid for the airline.
The largest German corporate rescue since the coronavirus
crisis struck will see the government get a 20% stake, which could rise to 25%
plus one share in the event of a takeover attempt, as it seeks to protect
thousands of jobs.
Lufthansa has been locked in talks with Berlin for weeks
over aid it needs to survive an expected protracted travel slump, with the
airline wrangling over how much control to yield in return for financial
support.
Germany's central government has spent decades offloading
stakes in companies, but remains a large shareholder in former state monopolies
such as Deutsche Post and Deutsche Telekom. Berlin also still has a 15% holding
in Commerzbank , which it took on during the global financial crisis.
Other airlines including Franco-Dutch Air France-KLM and
U.S. carriers American Airlines , United Airlines and Delta Air Lines have also
sought state aid after the coronavirus hit global travel.
Germany's Finance and Economy Ministries said on Monday that
Lufthansa, whose shares closed up 7.5% at 8.64 euros, had been operationally
healthy and profitable with good prospects, but had run into trouble because of
the pandemic.
"The support that we're preparing here is for a limited
period," Finance Minister Olaf Scholz said of the deal, under which
Germany is buying new shares at the nominal value of 2.56 euros apiece for a
total of about 300 million euros.
Berlin, which has set up a 100 billion euro fund to take
stakes in companies struck by the coronavirus crisis, said it plans to sell the
Lufthansa stake by the end of 2023.
"When the company is fit again, the state will sell its
stake and hopefully ... with a small profit that puts us into a position to
finance the many, many requirements which we have to meet now, not only at this
company," Scholz added.
Conditions of the deal include the waiver of future dividend
payments and limits on management pay, Lufthansa said, adding that the
government will also fill two seats on its supervisory board, with one becoming
a member of the audit committee.
SILENT PARTICIPATION
Under the bailout package, details of which were earlier
reported by Reuters, the government will also inject 5.7 billion euros in
non-voting capital, known as a silent participation.
Part of this could be converted into an additional 5% equity
stake, either to protect Lufthansa against a hostile takeover or in case coupon
payments of 4% in 2020 and 2021, increasing to 9.5% by 2027, are missed by the
airline.
"(The bailout deal) will prevent Lufthansa from being
sold out," Economy Minister Peter Altmaier said, adding that it would help
to save thousands of jobs but did not include any extra environmental
conditions on top of planned measures.
Lufthansa will separately receive a 3 billion euro
three-year loan from state-backed KfW and private banks.
The state's WSF rescue fund plans to refrain from exercising
voting rights at regular shareholder meetings under the bailout deal, which
still requires approval by shareholders as well as the European Commission,
Lufthansa said.
It is still discussing with Europe's competition watchdog
which airport slots it will have to give to ensure the bailout does not hamper
competition, a person close to the matter said.
"Scrutiny is extremely thorough as it is the first
large equity-based bailout in the pandemic," the source said.
German newspaper Handelsblatt reported that Chancellor
Angela Merkel had said that Berlin would fight to ensure that remedies were not
too stringent.
Comments
Post a Comment