Lufthansa is working on € 3 billion finance plan to help pay off state bailout

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Deutsche Lufthansa is working with banks on a plan to raise around € 3 billion in equity to help pay off its coronavirus bailout, people familiar with the matter say.

The timing and size of the capital increase will be subject to market conditions, and the company could raise the money as early as June, the people said.

Europe’s largest airline received a € 9 billion state bailout last year after the coronavirus pandemic ended a decades-long air travel boom. The new funding will provide enough liquidity to repay the bulk of a silent € 5.5 billion stake still held by the German government.

Executive compensation and Lufthansa’s M&A activity are limited until it repays the government bailout.

A Lufthansa spokesperson declined to comment.

Shares of the carrier group, which also includes Swiss, Brussels Airlines and Austrian Airlines, have gained around 5 percent since the start of the year.

Shareholders approved a possible capital increase of 5.5 billion euros last week.

Lufthansa had previously said it would not use the full amount available and instead aim for the “smallest possible increase”.

Lufthansa continues to lose money as the coronavirus pandemic restricts travel around the world. The airline reduced its monthly cash drain to 235 million euros in the first quarter and expects that figure to shrink to 200 million euros per month in the current period, bringing it down. will help reduce its operating loss from the 5.5 billion euros recorded last year.

Interest rates on silent participation, a hybrid debt-equity instrument that does not dilute shareholders’ voting rights, are expected to rise over the next few years.

Reuters earlier reported the size of the planned deal. – Bloomberg



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