BreakingviewsCapital Calls: Lufthansa braces for debt mountain fly-by

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Two Lufthansa planes are seen in Frankfurt, Germany, March 23, 2020.

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TWIN PEAKS. Deutsche Lufthansa’s (LHAG.DE) mammoth capital-raising plans don’t leave a lot of room to clear the top of its debt mountain. The German carrier is asking shareholders for permission to raise up to 5.5 billion euros in new equity, more than 80% of its current market value. It’s unclear when it will pass round the hat, or for how much. Chief Executive Carsten Spohr will need most of it.

Spohr’s first priority will be clearing the 1.3 billion euros he owes Berlin in equity and hybrid debt instruments known as a “silent participation”. There’s also another 1.2 billion euros in loans from Switzerland, Belgium and Austria. Assuming he raised the whole 5.5 billion euros, net debt would drop to 6.6 billion euros, the same as at the end of 2019. Yet EBITDA will still only be 3.1 billion euros next year, according to Refinitiv forecasts, leaving borrowings at a toppy 2 times that number. Shareholders who pony up are unlikely to see much of a dividend for some time. (By Ed Cropley)

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