Deutsche Lufthansa AG issued a plea to investors to turn up and vote for a 9 billion-euro (US$10 billion) bailout package or risk tipping Europe’s largest airline into insolvency.
The carrier said Wednesday it expects attendance at its June 25 shareholder meeting to fall below 50%, meaning two-thirds of shares voted would need to back the rescue. If more than half of investors participate, a simple majority is all that’s needed to pass the measure.
The missive -- the latest twist in a months-long saga -- comes just days before the pivotal vote meant to save a revered member of Germany’s corporate elite. Lufthansa said it would likely be forced to enter insolvency proceedings if the deal was shot down and no other solution was found.
The carrier faces a crash crunch after the coronavirus pandemic pushed revenues close to zero. Lufthansa said this month that it would have trouble covering payroll starting in July.
“The management board urgently appeals to all private and institutional shareholders to exercise their voting rights and to participate in the decision about the future of the company,” Lufthansa said in a statement.
Government Stake
With Lufthansa fighting for survival after the coronavirus crisis grounded global fleets, Germany this month offered a package of loans and equity investment to keep the carrier aloft. The terms call for the airline to issue a 20 per cent stake to the German government at the nominal price of 2.56 euros per share, a plank that needs to be approved at the online EGM next week.
Lufthansa’s unions, currently locked in talks with management over a restructuring package, are also calling on members that own shares to back the deal out of concern it might fail, according to people familiar with the matter who sought confidentiality.
Shareholder Pressure
Lufthansa also faces growing pressure from its top shareholder to alter the deal. Billionaire Hermann Thiele told the newspaper FAZ that he’d increased his stake in the airline. It’s now above 15 per cent, Lufthansa said Wednesday.
While he stopped short of saying he’d vote against the rescue plan, Thiele told the newspaper he was unhappy with bailout terms that would dilute shareholders and allow the government to pay a discount to acquire up to 25 per cent of the company.
Lufthansa shares were down 0.4 per cent to 10.37 euros as of 4:51 p.m. Wednesday in Frankfurt. They’ve declined 37 per cent this year.
Other investors said they’d support the deal despite reservations. Fund manager Patrick Schuchter of Union Investment, which holds 0.12% in Lufthansa, said he’d back the deal, but would like for it to be sweetened for shareholders.
German finance minister Olaf Scholz told reporters in Berlin the terms won’t be reassessed to address Thiele’s concerns. He said he was content with the current agreement with Lufthansa.
--With assistance from Birgit Jennen.
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