Lufthansa and the German government are in negotiations over an aid package of nine billion euros. The state wants 25 per cent plus one share.
Until now Lufthansa had refrained from commenting in detail on the talks with the German government. On Thursday afternoon (May 7), the company broke its silence in a mandatory announcement. The statement states that the group is negotiating «stabilization package for nine billion euros with the Federal Economic Stabilization Fund.»
An agreement has not yet been reached. «The negotiations and the process of political decision-making are still ongoing», Lufthansa said. The negotiations on financing measures include a silent participation and a secured loan. However, the conditions for both measures have not yet been determined.
State could theoretically block decisions
The German state has made it clear that it wants a stake in Lufthansa’s share capital. The aim is to «create a shareholding of up to 25 percent plus one share», according to the statement. This means that the state could theoretically block certain resolutions of the Annual General Meeting for which the approval of at least 75 percent of the capital is required.
In order for the state to get the 25 per cent, «various alternatives of a capital increase are being discussed, including an increase at the nominal value of the share, if necessary after a capital cut,» says Lufthansa. That would mean that current shareholders would lose influence.
Waiver of future dividend payments
The Economic Stabilization Fund is also seeking representation on the Supervisory Board. Lufthansa does not provide any details on this. It is also intending to impose conditions under German and European law, including the waiver of future dividend payments.
«While the state is likely to secure extensive monitoring and supervisory rights with the silent partnership, the share of the existing shareholders will be diluted by a capital reduction with a subsequent capital increase,» comments Roman Podhorsky, a specialist in capital market law. «However, future dividends are likely to continue to be distributed generously to the existing shareholders, as the German state will have to waive future dividend payments due to EU law requirements».