MIAMI – The Lufthansa Group (LH) has been informed by Germany’s Economic Stabilization Fund (WSF) that it has approved the stabilization package for the company.
According to LH’s press release, the package provides for stabilization measures and loans of up to €9b. WSF’s Executive Board fully supports the package.
In total, the WSF will have a silent stake of up to €5.7b in the assets of Deutsche Lufthansa AG. Of this number, approximately €4.7b is listed as equity in compliance with the rules of the German Commercial Code (HGB) and IFRS.
The silent participation is indefinite in duration and can be terminated by the company on a quarterly basis in whole or in part. In accordance with the agreed concept, the remuneration for silent participation is 4% for 2020 and 2021 and will rise to 9.5% in 2027 for the following years.
In addition, the WSF will subscribe to the stock by way of a capital increase to build up 20% of the share capital of Deutsche Lufthansa AG. The subscription price will be €2.56 per share, with a cash contribution of about €300m.
Further stake increment by WSF
In today’s press release, LH said that the WSF could also increase its stake to 25% plus one share in the event of a company takeover.
Furthermore, in the case of a non-payment of remuneration by the Corporation, a further portion of the silent participation shall be converted into a further shareholding of 5% of the share capital as early as 2024 and 2026 respectively.
However, the second conversion option applies only to the extent that the WSF has not previously increased its shareholding in connection with the above-mentioned takeover situation.
Conversion should also be necessary for the prevention of dilution. However, subject to the complete repayment of the silent stake by the firm and a minimum selling price of €2,56 per share plus an annual interest rate of 12%, the WSF undertakes to sell its shareholding in full at the market price by 31 December 2023.
Finally, the stabilization measures are complemented by a syndicated credit facility of up to EUR 3 billion, with the participation of KfW and private banks over a three-year period. The facility is still subject to the approval of the relevant bodies.
The anticipated conditions apply, in particular, to the waiver of potential dividend payments and the restriction of management remuneration.
Voting rights on the Supervisory Board
The press release also adds that two seats in the Supervisory Board are to be filled in conjunction 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 right to vote at the Annual General Meeting in the context of the usual resolutions of the Annual General Meetings.
The stabilization plan also needs the final approval of the Management Board and the Supervisory Board. In the near future, all bodies must come together to adopt resolutions on the stabilization program while capital measures shall be subject to the approval of the General Assembly.
At the end of April, the LH was considering bankruptcy under its own management amid reports of an alleged agreement for such multi-billion state aid.
The German government said on April 28 that there had not been an agreement on the state aid. According to a report by the German Press Agency, the talks were not expected to end by the end of April either, noting that with a company of this size, such aid must be used wisely.
A month has passed since then, and the announced stabilization package is still subject to the approval of the European Commission and any conditions relating to competition laws.