The German authorities will buy a 20% stake in Lufthansa
Purchase will occur within the framework of the aid package to the airline, which stipulates measures and stabilization loans of up to EUR 9 billion.
In Germany, the economic stabilisation Fund (WSF) has approved an aid package to rescue the airline Lufthansa. This is stated in the statement of the airline on Monday, may 25.
WSF will take a silent participation in the assets of Deutsche Lufthansa AG in the amount of 5.7 billion euros. Of this amount, approximately 4.7 billion euros is classified as equity in accordance with the provisions of the commercial code of Germany (HGB) and IFRS.
The silent participation is not limited in time and may be terminated by the company fully or partially. In accordance with the agreed concept, the remuneration for the silent participation is 4% in 2020 and 2021 and in subsequent years will increase to 9.5% until 2027.
In addition, the Fund will redeem 20% of the company’s capital by € 2.56 per share. Total cash contribution will amount to about 300 million euros. The Fund may also increase its stake to 25% plus one share in the event of a takeover.
Finally, stabilization measures also include syndicated credit line of up to 3 billion euros with the participation of WSF and private banks for a period of three years. This condition has yet to be approved by the relevant authorities.
“Expected conditions related, in particular, with the rejection of future payments of dividends and restrictions on remuneration of management… except absorption, WSF agrees not to use voting rights at the Annual General meeting in connection with Annual General meetings”, – said in a statement.
Note that the stabilization package must be approved by the members of the management Board and the Supervisory Board of the company. Both will meet soon to adopt resolutions for the stabilisation package. The final decision should also approve the European Commission.
Recall that in March, Lufthansa has decided to cancel 23 thousands of flights due to the coronavirus. The airline has sharply reduced transportation and extended restrictive measures in the future.
Later it became known that Lufthansa saw a record loss. The Lufthansa Group is negotiating with governments about involvement of various financial instruments, to ensure solvency in the near future.
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