Lufthansa to raise $ 2.5 billion to repay state bailout funds

(Bloomberg) – Deutsche Lufthansa AG plans to raise 2.14 billion euros ($ 2.5 billion) to repay part of a German government bailout that has helped the national carrier weather the pandemic of coronavirus.

The company will issue new shares at 3.58 euros each, according to a statement released on Sunday, less than half of Friday’s closing price of 8.21 euros. The deal will be signed by a syndicate of 14 banks with the backing of funds controlled by Blackrock Inc., the carrier said.

The move will help Lufthansa remove the state from its shareholder list around 18 months after taking the stake, something chief executive Carsten Spohr has been working to do ahead of Germany’s election next week. The carrier will narrowly miss the mark, with actions being offered from September 22 to October 5.

“We have always made it clear that we will only keep the stabilization package as long as necessary,” Spohr said in the statement. “So we are proud to be able to keep our promise now. “

Germany agreed to provide a € 9 billion bailout for Lufthansa at the start of the pandemic, when the carrier was forced to bring its fleet to a standstill and suffered a record loss. Repayment of the aid would free the company from the restrictive conditions that the European Commission has attached to its approval of the agreement, such as the ban on dividends, management bonuses and any purchase of shares of more than 10%. in a competing airline.

Electoral emergency

The urgency to repay the funds ahead of the elections came as Chancellor Angela Merkel’s conservatives lost ground to the Social Democrats of Olaf Scholz, a party that is expected to retain Lufthansa’s stake for longer. If Scholz replaces Merkel, as the polls suggest, he is also likely to be caught up in lengthy negotiations to form a coalition.

European carriers such as Lufthansa are now starting to recover from the crisis after more than a year of near stagnant air travel. The capacity of the various airlines of the German group has returned to more than half of pre-crisis levels, with planes more than 70% full in August, the company said.

Lufthansa expects passenger numbers to reach around half of 2019 levels over the next few months, the carrier said, supported by a recovery in business travel. The increase in freight traffic that was a rare blessing for airlines during the pandemic continues.

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