DThe struggle lasted for weeks. The federal government has now agreed on a concept for how the state will save Deutsche Lufthansa in the corona crisis. In essence, the group is spared having the federal government on board as a shareholder with a blocking minority of 25 percent plus one share. At Lufthansa, there were fears that there would be a lot of adjustment in the strategic course, tariff issues and even in the concrete flight schedule.
Nevertheless, the state will have a significant influence – through a direct participation of 20 percent. In addition, the concept of the federal government provides for two positions on the supervisory board. The state wants to get the shares cheaply. He would buy at the “nominal amount, possibly reduced after capital cut”. The nominal amount, which indicates the share in the share capital of the group, is 2.56 euros. On the stock exchange, paper has still been worth more than three times, despite significant price losses in recent months. If the share capital of the group were reduced in the course of a capital cut to compensate for shortfalls, the state could, according to calculations by Deutsche Bank, effectively only pay around one euro per share.
The bailout package with a volume of up to 9 billion euros has not yet been finally tied down, and reports say that the capital cut in particular is being discussed. The group only confirmed “advanced talks” with representatives of the German Economic Stabilization Fund, which would continue with the goal of “reaching a deal promptly”. Chancellor Angela Merkel said on Wednesday that a decision could be expected “in the near future” in the negotiations with Lufthansa. The government is in “intensive talks” with both the group and the EU Commission, which must approve the aid.
Extraordinary general meeting necessary
Lufthansa bodies also still have to clear the way. According to information from the F.A.Z. The board around boss Carsten Spohr wanted to discuss this in his daily switching conference on Thursday. Because of the open questions, a decision was not expected in industry circles. Two days after a vote by the Management Board, the Supervisory Board, which ultimately has to invite shareholders to an extraordinary general meeting, should then also make a decision.
As the liquidity of the group is increasingly melting, a cancellation by the Board of Management and the Supervisory Board to the Berlin concept is considered unlikely. It is less certain how the existing shareholders will position themselves. An entry into the state with 20 percent of new shares issued in the course of a capital increase dilutes the shares of the existing shareholders – according to calculations, by 17 to 22 percent in the event of a capital cut. The shareholders would still have to vote with a two-thirds majority at a general meeting for which invitations must be given within four weeks.
One argument for the approval of the shareholders is that otherwise the group could face bankruptcy with the Lufthansa, Eurowings, Swiss, Austrian Airlines and Brussels brands. Shares would probably be worthless in bankruptcy. On the other hand, there is the calculation that the state would not allow insolvency of Lufthansa, which is considered strategically important, and would ultimately somehow absorb the group. It is unclear whether such a poker can work.
There had been clear voices in the government coalition, especially from the SPD, that made state influence a condition for aid. After missing the majority of the general meeting, which would only be fixed in a month, there would also be very little time to design other escape routes. “There is no plan B or C at the moment,” said a person familiar with the process.
Multi-level auxiliary procedure
The aid concept developed in Berlin provides for a multi-stage process. In a first step, the group would receive 3 billion euros from a KfW loan in order to avoid short-term financial bottlenecks in any case. There would also be a silent participation by the economic stabilization fund.