Dividends and Lufthansa launches $3.2 billion stock sale to repay state bailout

When COVID hit the world and people for public health were told not to travel and shut within their home countries, the restrictions placed great pressure on the airlines and hospitality sectors. Some governments gave bailouts, bought bonds and some governments told equity positions.

In an article by Christopher Steitz , in Germany, the airline company Lufthansa announced it was doing a capital increase to raise $3.2 billion to pay back part of a state bailout. The airline received a $12 billion bailout from the Economic Stabilization Fund (ESF) because airline companies are an important aspect of every countries economic performance.

Chief Executive Carsten Spohr said we have always made it clear we will only retain the stabilization package for as long as necessary. People have begun to fly again and based on Lufthansa operating performance in July and August, the company is expected to post positive adjusted earnings before interest and taxes in the third quarter.

A number of funds under the management of Blackrock have entered into a sub-underwriting agreement for a total of $300 million as part of the capital increase and have committed to fully exercising their subscription rights. Currently the ESF has 15.6% of the shares and will try to sell them within 2 years of the completion of the share sale.

Linking to dividend paying companies, some of these companies are the backbone of their countries economies and even if the CEO does not like government involvement, they accept it to stay in business and have a future. When COVID happened and the government imposed measures to protect the health of its citizens, it also offered to help companies affected or they would have gone bankrupt. Government help is not always the answer, but it does help.

There are more questions than answers, till the next time – to raising questions.

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