(Bloomberg) – Germany’s € 9 billion (US $ 9.8 billion) bailout by Deutsche Lufthansa AG is being slowed down by discussions to ensure that the bailout plan will get quick approval from the European Union when it is completed the people familiar with the matter.
One detail that needs to be ironed out is a schedule for Germany to exit direct participation in Europe’s largest airline, said one of the respondents, asking not to be mentioned because the talks are confidential.
Bild am Sonntag previously reported that Lufthansa would have a period of three years to repay the aid package.
The outlines of the bailout agreement, which would make Germany the airline’s largest shareholder, came together last week and ended the week-long debates. The government had tried to make a formal offer to the airline this weekend, but talks between Germany, Lufthansa, and the European Commission are holding up the plan, the person added.
A meeting of the Lufthansa Supervisory Board was postponed from Monday to Tuesday, the Handelsblatt previously reported. The federal government has eased its demand that Lufthansa should accept deliveries of Airbus SE aircraft worth around 5 billion euros, the newspaper said.
The German aid package would include a loan of EUR 3 billion, a so-called silent participation, a direct state participation of 20% and a convertible bond, which corresponds to a 5% stake in Lufthansa plus one share. Federal Minister of Economics Peter Altmaier said in an interview on Saturday that an exit strategy must be part of the plan.
According to EU state aid guidelines, which were eased this month to alleviate the economic damage caused by the coronavirus crisis, Member States should reduce their stake in listed companies within six years. The EU’s competitive entity also banned payouts such as dividends and bonuses for top executives, while preventing companies from taking over 10% stakes in competitors, suppliers or customers.
Lufthansa is also ready to receive support from Switzerland, Austria and Belgium, where it has units.
Governments can set stricter aid conditions to limit the potential harm to rivals who do not receive similar aid. Ryanair Holdings Plc has already contested Air France-KLM’s bailout and vowed to do the same with Lufthansa. She complained that the German airline would end the crisis more severely, while low-cost airlines that get no help will compete with two hands tied behind our backs. “
The federal government declined to comment, as did a Lufthansa spokeswoman.
The European Commission declined to comment, citing an earlier statement that regulators were in constant contact with national governments and “were well aware of the difficult situation in the air transport sector due to the outbreak of the coronavirus”.
However, the Commission has also warned of growing differences within Europe in recent weeks as Germany accounts for more than half of the 1.95 trillion euros in state aid approved by EU regulators.
Lufthansa would issue the shares to the government at a nominal price of EUR 2.56, a large discount that would allow the state to benefit from any upward movement in the price. The parties are also discussing a capital reduction option where Lufthansa would issue shares below that price, Lufthansa said in a statement last week.
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