- Airline company Deutsche Lufthansa AG (OTCMKTS: DLAKY) and the German government have agreed on a preliminary deal of a 9 billion euro ($9.8 billion) bailout package
Airline company Deutsche Lufthansa AG (OTCMKTS: DLAKY) and the German government have agreed on a preliminary deal of a 9 billion euro ($9.8 billion) bailout package, according to CNBC. Lufthansa was especially hit hard by the coronavirus pandemic due to stay-at-home orders.
And Lufthansa has been in talks with the German government over the last few weeks in order to get through the economic crisis. At the same time, Lufthansa has been trying to figure out how much control to give up.
The German Finance and Economy Ministries pointed out that Lufthansa was an operationally healthy company prior to the outbreak. And Lufthansa was profitable before the pandemic.
The deal includes the waiver of future dividend payments and caps on management pay. And the government is also going to take two seats on the supervisory board, one of which will become a member of the audit committee. And the German government will take a 20% stake in Lufthansa, which it will sell by the end of 2023. The German government will buy the new shares at the nominal value of 2.56 euros each for a total of about 300 million euros.
Finance Minister Olaf Scholz pointed out that this bailout package was a “very good solution,” which accounts for the needs for the company and taxpayers. And the support is “for a limited period.”
Plus the German government will also invest 5.7 billion euros in non-voting capital into the company. Part of that could be converted into an additional 5% equity stake if coupon payments are missed or to protect the company from being taken over.
This silent participation will carry a coupon of 4% in 2020 and 2021, increasing to 9.5% by 2027 in order to encourage fast repayment.
Plus Lufthansa will receive a 3 billion euro loan from state-backed bank KfW and private banks with a three-year term. This bailout is still pending approval by shareholders along with the European Commission.