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Bloomberg
The German government is engaged in last-minute debates over the details of its bailout of Deutsche Lufthansa AG, with Chancellor Angela Merkel seeking a deal that doesn’t involve a direct stake in the national carrier, while her deputy, Finance Minister Olaf Scholz, favors such an investment, according to people familiar with the matter.
Under a scenario preferred by the chancellery, as well as the transport ministry and the airline itself, the German government would buy a convertible bond in Lufthansa that could later be exchanged into a direct stake that could be lower than 25%, the people said, declining to be identified because the matter is private.
The move would still enable the government to pocket a financial gain and protect the airline from a potential takeover. The Finance and Economy Ministries, on the other hand, have in principle agreed on taking a 25% plus one share stake in the airline at discount price of 2.56 euro per share, the nominal value of Lufthansa’s shares on the balance sheet, other people said.
While there is debate inside the government, reaching an accord in principle on the terms of the bailout still seems doable this week, other people said. Details could still change and talks could stretch into next week, said the people.
One issue being considered is Lufthansa’s shareholder base, which could block the bailout at an extraordinary shareholder meeting that the airline would have to convene to get the rescue package approved, some of the people said. Germany has entered into informal talks with the European Commission to move along the planned $9.8 billion bailout package aimed at keeping the airline aloft, according to some of the people.
Among demands by European regulators, in accordance with new subsidy rules outlined last week, is that the government dispose of its stake again after no more than six years. The step forward comes after the two sides came closer to an agreement on government appointments to the carrier’s supervisory board, the people said.