Lufthansa secures green light for €5.5bn capital raise

Deutsche Lufthansa shareholders approved a capital raise of up to €5.5 billion on Tuesday, a move management said is needed to repair the stricken carrier's balance sheet after the coronavirus pandemic punctured a decades-long boom in air travel.

At the German airline’s annual meeting, a majority of investors gave permission for the issuance of 2.15 billion new shares at a time of the carrier’s choosing. The nominal price of the stock would be €2.56 each, about a quarter of Lufthansa’s current share price, though the airline is likely to issue them at a higher amount.

The company said last week it wouldn’t use the full amount available, and instead aim for the “smallest possible” raise.

“The resolution is intended to enable us to increase our capital flexibly so that we can strengthen our balance sheet ratios again and return to our former financial stability,” Lufthansa’s chief executive Carsten Spohr in a speech to shareholders.

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The move gives Europe’s largest airline enough cash to replace Germany’s so-called silent participation, a major part of Lufthansa’s €9 billion government bailout. The interest rates on the instrument – a debt-equity hybrid that doesn’t dilute shareholder voting rights – are set to rise over coming years. – Bloomberg