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Lufthansa may issue convertible bond as part of bailout package
Posted on Thursday, 21 May 2020 15:36
German airline Lufthansa is in negotiations with the German government over a EUR 9.00 billion bailout, which could include an issue of convertible bonds.

The firm said it was holding advanced talks with the state and the Economic Stabilisation Fund (WSF) in a move which could see the country take a 20.0 per cent share of the business.

Of the EUR 9.00 billion value, EUR 3.00 billion would be in the form of a loan from state-owned development bank KfW.

The WSF will take a 20.0 per cent holding through participation in a capital increase, while an issue of convertible bonds amounting to a 5.0 per cent stake will also take place.

It would only exercise its voting rights under exceptional circumstances, such as protecting the businesses from a takeover approach.

However, the two capital increase deals must first be waved through by Lufthansa’s shareholders at an extraordinary general meeting. This must take place before the aforementioned loan can be granted.

The European Commission must also give its seal of approval to the proposal, as must the executive and supervisory boards.

Reuters picked up on the planned rescue package and noted that Lufthansa has suffered as a result of the coronavirus pandemic, which has had a devastating impact on the aviation sector as countries worldwide imposed lockdowns and travel bans to prevent the further spread of the disease.

The news provider noted that the likes of Air France-KLM, American Airlines, United Airlines and Delta Air Lines have also had to seek assistance from their respective governments.

Lufthansa employs 135,353 staff worldwide and, in addition to its airline operations, is active in logistics, maintenance, repair and overhaul and catering segments.

Its aviation activities are spread across its eponymous brand, in addition to the Network Airlines, Eurowings and Aviation Services banners.

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