Lufthansa CEO Carsten Spohr and CFO Remco Steenbergen really did their best on Monday morning to make the just announced capital increase attractive to investors. Spohr, for example, pointed out that you can now really see business travel coming back. Since summer business has gone so well, Lufthansa will post an operating profit for the third quarter, according to Steenbergen. And in the ongoing renovation, annual structural costs of 3.5 billion euros are taken from the company.
Nevertheless, the question arises: why now? The timing of the capital increase, through which Lufthansa is expected to receive 2.1 billion euros, is not only “confusing” in the opinion of Bernstein Research analyst Daniel Röska. After all, the share price has fallen steadily over the past few weeks, major long-haul routes to the United States are still largely closed to Europeans, demand is still well below levels of before the crisis and the capacity should reach only half. 2019 by 2021. The question of who will actually be responsible for the federal government in Germany in the future and thus determine the political direction of environmental and air transport policy has not yet been answered and therefore also contributes to uncertainty. In short: delaying the capital increase until at least the long term is released again, according to Röska, would have aroused more benevolence among investors. Above all, the business does not need any new money at the moment.
The presumed answer to the timing question can be found, so to speak, in the small print and in the archives: Lufthansa wants to get rid of the state’s participation as quickly as possible, which it considers too restrictive in terms of activity and above all in those who have been in the group for a long time. Old traumas served by too much state influence. At the time, in the early 1990s, when Lufthansa faced an existential crisis, it was still part of the state. However, it was only thanks to government intervention that it was able to avoid bankruptcy last year.
Germany, Switzerland, Austria and Belgium provided around nine billion euros in total – Lufthansa only had to use a fraction of this as it was able to access the capital markets again with bonds in the fall of 2020.
The group wanted to have repaid state aid at the time of the legislative elections.
When Lufthansa presented the capital increase plans in the spring, Spohr had hoped the airline would repay state aid – if possible – before the parliamentary elections. It didn’t work, but at least she now has a clear timeline not only for this, but also for the release of the Economic Stabilization Fund (FSM) as a shareholder. In October, Lufthansa plans to repay 1.5 billion euros from Silent Company I and another billion from Silent Company II by the end of the year. and therefore no longer has access to it.
In this way, Lufthansa avoids expensive interest rates, which would have risen sharply over the next few years for the aid. However, the consequences for the actual state participation are also decisive: the WSF currently holds a 15.84% stake in Lufthansa. If he participates in the capital increase, he undertakes to start selling his shares at the end of six months at the latest and must have given up the entire package after two years at the latest. The WSF does not wish to comment on the subject before the end of the subscription period on October 5th.
If he exercised all the subscription rights, he would have to pay 340 million euros for the shares, but he could also assign the rights in whole or in part. Since the shares are offered significantly below the current market price, the federal government could likely realize a significant accounting profit if they were sold at a later date. The WSF had acquired the initial 20 percent stake for a price of 2.50 euros, but had already sold part of it at a large profit.
Lufthansa offers the new shares at a high price: during the capital increase, they will cost 3.58 euros, 56% less than the closing price last Friday. Shareholders can buy one additional share for each share they own. However, a consortium of 14 banks fully guarantees the capital increase. Several investment funds managed by Black Rock have committed to fully exercise the subscription rights for a volume of 300 million euros. And all Lufthansa boards also want to buy as many shares as they are allowed to.