The German Lufthansa Group are to get a €9 billion / £8 billion lifeline it was confirmed on Monday, after the German authorities agreed on the rescue deal that will see the state take a 20% stake in the airline group. The investment could rise to 25% plus one share in the event of a takeover attempt, as the authorities work hard to protect thousands of jobs.
Discussions between the airline group and the government had been going on for weeks as the lockdown and global travel crisis caused by the coronavirus COVID-19 pandemic. Germany’s Finance and Economy Ministries said Lufthansa had been healthy and profitable with good prospects but, like most airline during this strange time, had run into trouble because of the pandemic. Finance Minister Olaf Scholz said: "The support that we’re preparing here is for a limited period. - 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."
The Economic Stabilization Fund (WSF) will make silent participations of up to 5.7 billion euros in total in the assets of Deutsche Lufthansa AG. Of this amount, approximately EUR 4.7 billion is classified as equity in accordance with the provisions of the German Commercial Code (HGB) and IFRS. In this amount, the silent participation is unlimited in time and can be terminated by the company on a quarterly basis in whole or in part. In accordance with the agreed concept, the remuneration on the silent participations is 4% for the years 2020 and 2021, and rises in the following years to 9.5% in 2027.
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| Photo Lufthansa |
Lufthansa said that the WSF will subscribe to shares by way of a capital increase in order to build up a 20% stake in the share capital of Deutsche Lufthansa AG. The subscription price will be 2.56 Euro per share, so that the cash contribution will amount to about 300 million Euro. The WSF may also increase its stake to 25% plus one share in the event of a takeover of the company.
In addition, in the event of non-payment of remuneration by the Company, a further portion of the silent participation is to be convertible into a further shareholding of 5% of the share capital at the earliest from 2024 and 2026 respectively. The second conversion option, however, only applies to the extent that the WSF has not previously increased its shareholding in connection with the above-mentioned takeover case. Conversion should also be possible for dilution protection. Subject to the full repayment of the silent participation by the company and a minimum sale price of EUR 2.56 per share plus an annual interest of 12%, the WSF undertakes, however, to sell its shareholding in full at the market price by 31 December 2023.
Finally, the stabilization measures are supplemented by a syndicated credit facility of up to EUR 3 billion with the participation of KfW and private banks with a term of three years. This facility is still subject to the approval of relevant bodies.
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| Photo Lufthansa |
The expected conditions relate in particular to the waiver of future dividend payments and restrictions on management remuneration. In addition, two seats on the Supervisory Board are to be filled in agreement with the German government, one of which is to become a member of the Audit Committee. Except in the event of a takeover, the WSF undertakes not to exercise its voting rights at the Annual General Meeting in connection with the usual resolutions of ordinary Annual General Meetings.
The stabilization package still requires the final approval of the Management Board and the Supervisory Board of the company. Both bodies will come together shortly to adopt resolutions on the stabilization package. The capital measures are subject to the approval of an extraordinary general meeting.
Finally, the stabilization package is subject to the approval of the European Commission and any competition-related conditions.
Lufthansa Group extends free rebooking period
The Lufthansa Group Airlines Lufthansa, SWISS, Austrian Airlines, Brussels Airlines and Air Dolomiti are even more responsive to their customers when it comes to rebooking. Anyone booking a flight in the next few weeks can do so without any worries.
Passengers who wish to change their travel date can make a one-time rebooking free of charge for the same route and the same class of travel.
The journey can also be postponed to the second half of 2021, so that nothing stands in the way of a relaxing summer holiday or attending an event on the new date next year. The new travel date must be before 31 December 2021.
This rule applies to tickets booked up to and including 30 June 2020 and with a confirmed travel date up to and including 30 April 2021. The rebooking must be made before the originally planned start of travel.
Previously, if a rebooking was made, the new trip had to start by 30 April 2021. This period has now been extended. Lufthansa Group Airlines is thus responding to the wish of many customers to be able to make their travel plans more flexible due to the current exceptional circumstances.
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