Lufthansa Group to raise $2.5B in share sale to repay government loan
Lufthansa Group plans to raise €2.1 billion ($2.5 billion) in a capital increase to repay the government funding it received to help it through the COVID-19 pandemic.
Many other carriers also turned to their governments for financial support to get them through the Coronavirus crisis. Lufthansa (LHAB) (LHA) has repeatedly said in recent months that it wanted to repay the government loan as soon as it could.
“We have always made it clear that we will only retain the stabilization package for as long as it is necessary,” Lufthansa Chief Executive Carsten Spohr commented in a statement on September 19, 2021. “We are therefore proud that we can now deliver on our promise and repay the measures faster than originally expected.”
The capital increase comes as the airline is seeing a rebound in travel demand. Based on its operating performance in July and August, Lufthansa (LHAB) (LHA) says it expects its third-quarter adjusted earnings before interest and tax (EBIT) will be positive.
It adds that capacity has returned to more than half of pre-crisis levels and that its planes were more than 70% full in August. It expects passenger numbers will continue to reach around half of pre-crisis levels over the coming months, boosted by the return of corporate travel.
“Current bookings indicate a sustained demand recovery,” it notes in the statement.
The German airline says the sale of new shares, which will take place from September 22, 2021 to October 5, 2021, will enable it to establish a “sustainable and efficient capital structure”. It expects the new shares will start trading on October 7, 2021. The transaction is fully underwritten by a banking syndicate and investor BlackRock.
Lufthansa (LHAB) (LHA) will use the net proceeds from the capital increase.to repay the Silent Participation I of €1.5 billion from the German government’s economic stabilization fund. It also says it aims to repay another €1 billion of Silent Participation II by the end of 2021.
Chief financial officer Remco Steenbergen adds that the Lufthansa Group is “committed to further explore portfolio measures when full value can be achieved to maximize the value and strategic flexibility of the Group.”
Lufthansa (LHAB) (LHA) has previously said that it is planning the sale of other business units that it deems non-core, such as AirPlus and LSG. It has also hired banks to investigate whether it should partially sell or float maintenance unit Lufthansa Technik.
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