UPDATE 1-Lufthansa has 'no intention' of ending JetBlue stake

Thu Mar 29, 2012 5:42pm EDT

* CEO says convertible notes good way to raise capital

* Investors can take stock or cash in 2017

WASHINGTON, March 29 (Reuters) - Deutsche Lufthansa AG has no intention of ending its investment in JetBlue Airways Corp, but the possibility remains that it could do so down the road depending on the capital needs of the German airline, its chief executive said on Thursday.

Christoph Franz told reporters that Lufthansa's earlier announcement about offering convertible notes that can be exchanged for up to 46.7 million shares of JetBlue common stock is an attractive way "given current market conditions" to get financing.

"It's not the intention of Lufthansa to sell stock and terminate our investment in JetBlue," he said. "We did not sell one single share."

Lufthansa gives investors the option of converting their holdings into cash or shares in 2017.

That, according to Franz, means Lufthansa would, in the future, weigh maintaining or possibly decreasing its stake, depending on JetBlue's share performance.

Lufthansa owns roughly 16 percent of JetBlue. Franz said its marketing agreement with JetBlue is unchanged.

Dahlman Rose & Co analyst Helane Becker said Lufthansa did not consider JetBlue a core investment and would take a loss on JetBlue shares if it sold them today.

"I guess what (Franz) is saying is that if he has to repay this in five years, he'd rather pay it in cash than in JetBlue equity," Becker said.

JetBlue shares dropped more than 4 percent in over-the-counter trading on Thursday, finishing at $5 per share.

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