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Lufthansa May Need Shield From Creditors

German airline Lufthansa warned on Wednesday that it might need to apply for protection from creditors. That is if its state-backed bailout deal failed to win sufficient support at a shareholder vote on June 25.

Its statement came after German billionaire Heinz Hermann Thiele criticized the 9 billion euro ($10.1 billion) bailout. He raised his stake in Lufthansa to over 15%. He hoped to explore alternative options.

In an interview with the Frankfurter Allgemeine Zeitung newspaper, Lufthansa’s biggest shareholder said he was not satisfied with the deal. It gives the German government a 20% stake in the airline and two seats on its supervisory board.

The protracted travel slump due to the coronavirus pandemic hit Lufthansa hard. Stock market news reports it is forcing it to seek the bailout.

Board Expectations

The company said its executive board expected the attendance at its June 25 virtual general meeting. That is to vote on the deal to be under 50%. Additionally, this would mean two-thirds of those present would need to vote in favor.

 The board considers it possible that the stabilization package could fail to achieve the two-thirds majority of votes cast.

Lufthansa also said it might possibly have to apply for protective shield proceedings under insolvency law. That will be a few days after the meeting if no other solution immediately comes up.

Under German protective shield proceedings, a company’s management remains in charge. And it gets up to three months to come up with a survival plan.

German Finance Minister Olaf Scholz said after Thiele’s comments that he did not worry the deal could collapse. Moreover, he showed genuine satisfaction from the agreement, urging shareholders to approve it.

Thiele, the honorary chairman of Knorr-Bremse declined to comment on Lufthansa’s statement. In stocks, shares rose 1.3% at 1115 GMT after the disclosure that Thiele had a 15.5% stake.

Lack of Responsibility

Michael Theurer, a senior member of the opposition Free Democrats said the German government has taken a high-risk bet. Its wish for the government to take a direct stake in Lufthansa puts its employees’ jobs at risk. It’s completely irresponsible.

Vanessa Golz, covers it for investment fund Deka, which owns 0.9% of the airline. She said there was no question it needed a bailout and time was pressing.

Stock trading reports that Lufthansa shareholders must register to attend the virtual shareholder meeting by June 20. And if more than 50% attend, a simple majority would suffice, the airline said.

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