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Deutsche Lufthansa plans to raise €2.14bn to pay back government bailout

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Deutsche Lufthansa plans to raise €2.14bn to pay back government bailout
The German government agreed to bail out Lufthansa at the start of the COVID-19 pandemic as travel bans forced a global travel grounding. Photo: PA

Deutsche Lufthansa (LHA.DE) stock headed more than 2% higher on Monday morning in London as the German airline announced plans to repay €2.14bn ($2.5bn, £1.8bn) in state-backed coronavirus bailouts. 

The fundraising comes through a heavily discounted share sale, offering new shares at €3.58 apiece, less than half of Friday’s closing price of €8.21.

It aims to return the €9bn in state borrowings by the end of the year, the airline said in a statement on Sunday. 

The German government agreed to bail out Lufthansa at the start of the COVID-19 pandemic as travel bans forced a global travel grounding.

The European Commission had put restrictions on the deal, banning dividends, management bonuses and any purchase of a stake of more than 10% in a rival airline. Repaying the money will free the airline from these commitments. 

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Shares headed higher despite the discounted offering, which had been anticipated by the market. CEO Carsten Spohr had originally aimed to repay the loan before a federal election next Sunday — a deadline the airline will miss as the sale completes on 5 October. 

Spohr said the airline will look to secure a deal with chancellor Angela Merkel before she leaves office. 

Deutsche Lufthansa
Deutsche Lufthansa stock headed more than 2% higher on Monday morning in London. Chart: Yahoo Finance UK

"We have always made it clear that we will only retain the stabilisation package for as long as it is necessary," Spohr said.

"We are therefore proud that we can now deliver on our promise and repay the measures faster than originally expected. We can now fully focus on the further transformation of the Lufthansa Group." 

Some €2.7bn has already been repaid by the airline. The share sale leaves about €1.5bn still outstanding. 

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