German airline Deutsche Lufthansa AG (ETR: LHA) simply known as Lufthansa confirmed being in advanced talks over a 10 billion euros ($9.9 billion) government bailout which will be used to assist the airline overcome the pandemic.
In return, German government will get 20% stake in the airline, Lufthansa says the government will also have two seats in the company’s supervisory board.
However, the two government representatives won’t be able to exercise full voting rights unless during exceptional circumstances like protecting the airline against a takeover.
For a while now reports have been doing rounds revealing how the airline has been engaging the state seeking help to be bailed out of the pandemic which has completely crippled the aviation industry globally.
It is alleged the deal is taking too long to close because there is a wrangle on how much returns will the state generate from the injection. Direct involved sources disclosed that the state is yet put forward a final offer.
Lufthansa says it’s looking forward for a deal which includes a waiver for future dividend payment and one which reduces remunerations of top executives, further commenting the deal must be approved by the European Commission.
In addition, Lufthansa expects to secure a 3 billion euros loan from the government-backed bank KfW BANKENGRUPPE and a convertible bond. This will be exchanged for an additional 5% stake in the airline plus one share in a scenario of a public takeover bid by a third party.
Lufthansa is hoping the deal will be closed in the shortest time possible so that it can secure long term solvency.