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Lufthansa Nears Rescue Making Germany Its Top Shareholder – Yahoo Canada Finance

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Lufthansa Nears Rescue Making Germany Its Top Shareholder

(Bloomberg) — Deutsche Lufthansa AG is close to a multibillion euro bailout deal that would see the state become its biggest shareholder after the coronavirus punctured a decades-long boom in air travel.

The shares gained as much as 8.3% Thursday after Europe’s largest carrier confirmed it’s in advanced talks with Germany’s WSF Economic Stabilization Fund for as much as 9 billion euros ($9.9 billion) in aid. The package would include a 3 billion-euro loan, a so-called silent participation and a 20% direct stake through the sale of new shares, Lufthansa said.

The government would also receive a convertible bond equivalent to 5% plus one share. Under German law, the 25% plus one share total stake would enable the state to block motions at annual general meetings, giving it a veto over hostile takeover attempts.

“A decision can be expected shortly,” German Chancellor Angela Merkel said late Wednesday in Berlin, adding that “intensive talks” were ongoing with the company and the European Commission, which would need to approve a deal.

If agreed, the compromise deal would bring the curtain down on weeks of tense negotiations between the company and state officials. At issue was the question of how involved the state should be in the affairs of a company that’s long been a symbol of German industrial might and its identity as exporter to the world. Like other airlines across the globe, Lufthansa has been battered by a near-halt to air travel that’s ruined the finances of previously healthy carriers and forced them to seek state bailouts.

Under the plan, Germany would also receive two seats on Lufthansa’s supervisory board. The company didn’t say whether these would be political or independent figures, a matter under discussion in negotiations.

The seats should be occupied by experts who won’t influence business decisions, said Carsten Linnemann, a legislator in Merkel’s CDU-led conservative caucus group. “The goal is an early exit of the state, so that Lufthansa will be able to stand on its own feet again.”

Lufthansa advanced 5.6% to 8.36 euros as of 1:43 p.m. Thursday in Frankfurt. The stock has lost about half its value this year.

EU Decision

An accord could be completed rapidly once the European Commission grants its approval.

The commission declined to comment Thursday on specific cases. It said in an email that it’s aware of the difficulties in the aviation sector and European Union state-aid rules “enable member states to support companies affected by the outbreak.”

It would also set the scene for a dramatic extraordinary general meeting at which shareholders would vote on whether to accept a package that would dilute their own stakes.

Lufthansa would issue the shares to the government for the nominal price of 2.56 euros, a steep discount that would allow the state to profit from any upside to the price. The parties are also discussing a capital-cut option that would see Lufthansa issue shares below that price, the statement said.

Lufthansa units in Switzerland, Austria and Belgium, stand to receive some 2 billion euros in additional funds from those countries. The Swiss deal totaling 1.28 billion francs ($1.3 billion) is in place, while the Austrian and Belgian ageements are likely to follow Germany’s.

Grand Compromise

Final details of the German deal are still being worked out, according to a government spokeswoman.

The contours of a deal come after the airline warned in a letter that cash reserves continued to shrink while it negotiates the rescue package. Lufthansa’s board said it hoped the government would find the “political will” for a deal that would keep the carrier competitive against international airlines.

The German government and Lufthansa have been locked in intense negotiations for weeks over the rescue plan. While the Economy Ministry and Finance Ministry internally agreed on taking a stake of 25% plus one share, the company had opposed the move, people familiar with the matter said earlier.

Lufthansa executives had raised concerns that the terms on offer would hamstring it against international competitors who’ve received less stringent bailout conditions, a point the management board repeated in the letter to employees.

Christian Democrats had also voiced concern that the running of Lufthansa risks becoming politicized. The party is trying to prevent Ulrich Nussbaum, the deputy to Economy Minister Peter Altmaier, from taking one of the board seats. They feel Nussbaum betrayed his boss by forcing his own agenda in the talks.

“The two seats in the supervisory board must now be occupied by experts, who will aim for the economic recovery of Lufthansa and who won’t follow a political agenda,” CDU legislator Linnemann said.

Lufthansa is burning through 800 million euros each month after the coronavirus grounded most of its fleet. Chief Executive Officer Carsten Spohr said on May 5 that the company had about 4 billion euros in cash remaining.

(Updates with legislator, European Commission comment from seventh paragraph)

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Canada says U.S. ties could be undermined if Michigan shuts pipeline

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A day before Michigan’s deadline to close down a key crude oil pipeline, Canada on Tuesday issued its strongest remarks so far, saying the move could undermine relations with the United States, its closest ally and trading partner.

Enbridge Inc is preparing for a legal battle with Michigan and courting protests from environmental groups, betting it can ignore the state’s Wednesday deadline to shut down Line 5, which runs under the Straits of Mackinac.

The Canadian government said in a U.S. federal court filing that Michigan had no right to act unilaterally since a 1977 Canada-U.S. pipeline treaty guarantees the free flow of oil between the two nations.

“This case raises concerns regarding the efficacy of the historic framework upon which the U.S.-Canada relationship has been successfully managed for generations,” Ottawa said.

Michigan’s move “threatens to undermine important aspects of that cooperative international relationship”, it added.

The brief said Canada would suffer “massive and

potentially permanent disruption” from a shutdown. Line 5 brings 540,000 barrel-per-day of oil from western Canada to refineries and airports in Ontario, Quebec, Michigan, Ohio and Indiana.

In November, Michigan Governor Gretchen Whitmer gave Enbridge six months to shut down the pipeline that runs four miles (6.4 km) along the bottom of Lake Michigan-Huron, citing fears it could rupture.

The order needs a confirmatory order from a judge to enforce it, and Enbridge and Michigan are disputing whether the issue should be heard in state or U.S. federal court.

The sides are in court-ordered mediation, with the next session scheduled for May 18.

“We will not stop operating the pipeline unless we are ordered by a court or our regulator, which we view as highly unlikely,” Enbridge spokeswoman Tracie Kenyon said in a statement this week.

Joe Comartin, Canada‘s consul general in Detroit who is arguing on behalf of Ottawa, said litigation could drag on until at least 2024.

“I don’t see a court jumping the gun and ordering it closed … until the litigation and constitutional issues are resolved,” he said by phone.

Canada has been lobbying https://www.reuters.com/business/energy/frustrated-canada-presses-white-house-keep-great-lakes-oil-pipeline-open-2021-04-26 Washington officials to keep the pipeline open in what is likely to be an election year in Canada, but the White House has so far not weighed in.

Ontario estimates the city of Sarnia, across the border from Michigan, could lose 5,000 refinery and chemical plant jobs. Industry lobbyists say thousands of U.S. jobs are in danger.

Environmentalists and indigenous groups opposed to Line 5 say the potential job losses are exaggerated. They plan “Evict Enbridge” rallies in Mackinaw City, Michigan, on Wednesday and Thursday.

“We are very hopeful to hear from the governor that there will be accountability measures for operating that pipeline,” said Beth Wallace of the National Wildlife Federation.

Michigan is reviewing what it could do if Enbridge keeps operating past the deadline, said a spokeswoman for the Michigan Attorney General.

Canadian crude market forward prices suggest most traders do not expect Line 5 to shut in coming months, but the lack of certainty is concerning, said one Calgary-based market source.

(Reporting by David Ljunggren and Nia Williams; Editing by David Gregorio and Marguerita Choy)

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Enbridge vows to keep pipeline open, girds for legal fight with Michigan

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Canadian pipeline company Enbridge Inc is squaring off for a legal battle with Michigan and courting protests from environmental groups, betting it can ignore the U.S. state‘s Wednesday deadline to shut its oil pipeline that runs under the Straits of Mackinac.

“We will not stop operating the pipeline unless we are ordered by a court or our regulator, which we view as highly unlikely,” Enbridge spokeswoman Tracie Kenyon said in a statement this week, ahead of Michigan’s deadline for shutting the line.

Line 5 is a link in Enbridge’s network to bring oil exports from western Canada to refineries and airports in Ontario, Quebec, Michigan, Ohio and Indiana. In November, Michigan Governor Gretchen Whitmer gave Enbridge six months to shut down the 540,000 barrel-per-day pipeline that runs four miles along the bottom of Lake Michigan-Huron, citing fears it could rupture and spill.

The state’s order still needs a confirmatory order from a judge to enforce it, and Enbridge and Michigan are disputing whether the issue should be heard in state or U.S. federal court.

The sides are in court-ordered mediation, with the next session scheduled for May 18.

Joe Comartin, Canada‘s consul general in Detroit who is arguing on behalf of the country’s federal government, said litigation could drag on until at least 2024.

“I don’t see a court jumping the gun and ordering it closed … until the litigation and constitutional issues are resolved,” he said in an interview.

The Canadian government has been lobbying officials in Washington to keep the pipeline open in what is likely to be an election year in Canada, but the White House has so far not weighed in on the matter.

The Ontario government estimates that the city of Sarnia, just across the border from Michigan, could lose 5,000 refinery and chemical plant jobs. Industry lobbyists say thousands of jobs are also at risk in the United States.

Environmentalists and indigenous groups opposed to Line 5 say the potential job losses are exaggerated, and are planning “Evict Enbridge” rallies in Mackinaw City, Michigan, on Wednesday and Thursday.

“Past May 12, Enbridge will be operating illegally as per state laws. We are very hopeful to hear from the governor that there will be accountability measures for operating that pipeline,” said Beth Wallace of the National Wildlife Federation.

Michigan is reviewing what remedies would be available to the state if Enbridge keeps operating past the deadline, said Lynsey Mukomel, a spokeswoman for the Michigan Attorney General.

Canadian crude market forward prices suggest most traders do not expect Line 5 to shut in coming months, but the lack of certainty is concerning, said one Calgary-based market source.

“We are looking at all our options and we will leave no stone unturned in defending Canada‘s energy security,” Natural Resources Minister Seamus O’Regan told an emergency parliamentary debate on the pipeline last Thursday.

“We will be ready to intervene strategically at precisely the right moment,” he continued, without giving details.

 

(Reporting by David Ljunggren and Nia Williams; Editing by David Gregorio)

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U.S. State Dept approves potential sale of AEGIS Combat System to Canada

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The U.S. State Department has approved the potential sale to Canada of 4 AEGIS Combat Systems made by Lockheed Martin in a deal valued at up to $1.7 billion, the Pentagon said on Monday.

The Pentagon said the sale of the powerful missile and radar systems to the NATO ally would “significantly improve” network-centric warfare capabilities for U.S. forces operating globally alongside Canada‘s.

AEGIS systems are primarily used aboard ships though they have been adapted for land use.

The package would include four shipsets worth of the AEGIS Combat System and three shipsets of the MK 41 Vertical Launch System as well as support equipment, spares and technical support, the Pentagon said.

The Pentagon’s Defense Security Cooperation Agency notified Congress of the possible sale on Monday.

Despite approval by the State Department, the notification does not indicate that a contract has been signed or that negotiations have concluded.

 

(Reporting by Mike Stone in Washington; editing by Grant McCool)

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