Lufthansa Completes €1.6 Billion Bond Issue, 2021 Financial Liabilities Refinanced for Long Term
The Lufthansa Group has successfully completed a €1.6 billion bond issue, thereby refinancing all 2021 financial liabilities for the long term. The company has repaid their KfW loan ahead of schedule in accordance with the additional funds.
On Thursday (February 4, 2021), Deutsche Lufthansa AG announced the successful completion of a €1.6 billion bond issue, with a denomination of €100,000, in two tranches with maturities of four and seven years respectively. The first tranche matures on February 11, 2025 and has a volume of €750 million with a 2.875 percent annual interest rate, while the second tranche, totaling €850 million, matures on February 11, 2028 and bears an annual interest rate of 3.75 percent. Proceeds from the issue, as well as €2.1 billion raised in H2 2020, will refinance all the company’s 2021 financial liabilities on a long-term basis and facilitate the early repayment of a €1 billion to the KfW (German state-owned development bank). Once the KfW loan is satisfied, Lufthansa will again have the aircraft pledged as collateral at their disposal.
In Thursday’s announcement, Deutsche Lufthansa AG’s Chief Financial Officer, Remco Steenbergen, said,
“We are very grateful for the support we receive in our home markets. Today’s successful bond placement allows us to repay the entire KfW loan. The refinancing even lowers our financing costs. Despite the repayment, however, it is likely that we will draw additional elements of the stabilization package which are currently unused. The extent of the utilization will depend on the further course of the pandemic.”
At September 30, 2020, the Lufthansa Group had cash and cash equivalents totaling €10.1 billion, including stabilization funds from the governments of Germany, Switzerland, Austria and Belgium. As of that date, the company had drawn less than €3.0 billion out of total available stabilization funds of up to €9.0 billion. Undrawn funds include €4.5 billion in WSF Silent Participation I funds, which would strengthen Lufthansa’s equity in accordance with IFRS (International Financial Reporting Standards).