German Government To Take 20% Stake In Lufthansa

Before everybody complains about supposedly free money for Lufthansa: the deal is not too good from their perspective.

It is worth noting that the german government pays 2,56€ per stock (which is lower than the current price of 9,218€) -> the share is diluted. Lufthansa has to pay interest for the loan of 4% in 2020 and 2021 and after that that the interest will raise to 9,5% until 2027. The german government can convert bonds to own 25% if Lufthansa does not pay, if the stock is further diluted or if another company wants to take over Lufthansa.

Important: Current main shareholders Mr. Thiele, Blackrock and Lansdowne will lose power and the stock looses value. The members of the board will receive a basic salary of 80% and are not allowed to receive any bonus payments (!). Lufthansa will have to continue to invest in a modern airbus fleet.

Lufthansa *still* has not issued refunds for cancelled flights.

From what I see, Germain governments get what they want. Two seats in the supervisory board were unthinkable for Lufthansa to give up under normal circumstances, but apparently we are anywhere but normality. Hopefully this intervention will stop LH from its notoriously monopolistic expansion.

Guaranteed yield seems to indicate this is preferred stock and may not carry voting rights. But given that the holder is the government, they don't really need voting rights to get things done.

This is how to do a bailout. Take equity, dilute the existing stockholders and give taxpayers the upside when it comes.

Not a bad deal for everyone face it Germany's image would have taken a real hit if Lufthansa filed. Now the question will be Virgin Atlantic.

Has anyone noticed that Callahan of BA has been real quiet of late?

Good, this is how things should be. Want money? Give up equity or pay a huge premium on loans to account for the risk. Or do what the Japanese do, and try to prop up the entire industry rather than giving bailouts.

Funny how the country who screams "capitalism" the loudest is the one who keeps giving bailouts.

Carsten Spohr has stolen 2 Billion refunds from his clients. One of the biggest robberies in modern history. Instead of put him to jail German government gives him another 9 Billion.

Significant equity for the taxpayers is what SHOULD have happened in the USA but didn't. We just gave money away to investors who need it least.

In almost every way, Europe has handled the coronavirus better than our federal government has, so far.

When the banks were bailed out by governments, as a penalty the EU forced them to divest of assets (RBS was made to sell Citizens Bank, WorldPay, Direct Line insurance etc). Similar happened in Japan when JAL was bailed out and had to divest most of its international business. Why is the EU not demanding Lufthansa sells Swiss, Austrian and/or Brussels Air?

Tonight Ryanair has filed a complaint with the EU about German state aid to ensure that competition in Germany happens. There has been a mention of the EU requiring Lufthansa divest daily slots the equivalent of using 3 aircraft at Frankfurt. Hardly seems a penalty when Lufthansa has 600 aircraft slots.

Good deal for government . Keeps Lufthansa flying and motivated . Bad deal for existing shareholders but better than bankruptcy . Covid 19 has severely damaged so many businesses, none of us could have imagined this just 6 months ago .