Lufthansa soars after top shareholder backs bailout

Billionaire Heinz Hermann Thiele’s backing for the Lufthansa deal will come as a relief for Chancellor Angela Merkel, who can ill afford another business collapse. (AFP)
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Updated 26 June 2020

Lufthansa soars after top shareholder backs bailout

  • Flagship airline wins 11th-hour reprieve with government set to take 20% stake

FRANKFURT, Germany: Lufthansa shares jumped around 15 percent on Thursday after its top shareholder dropped his objections to a €9 billion ($10 billion) government bailout for the German airline brought to the brink of collapse by the pandemic.

“I will vote for the proposal,” billionaire investor Heinz Hermann Thiele, who recently increased his stake in Lufthansa to 15.5 percent, told the Frankfurter Allgemeine daily on Wednesday.

His endorsement amounts to an 11th-hour reprieve for Germany’s flagship airline after fears had swirled he might veto the proposed rescue, which will see the government take a 20 percent stake and board seats, diluting existing shareholdings.

Shareholders are due to vote on the plan later on Thursday at a meeting held online due to the pandemic. Thiele has a virtual veto, as only 38 percent of shareholders have registered to vote.

Thiele’s backing will come as a relief to Chancellor Angela Merkel, who could ill afford another high-profile business collapse following the failure of payments firm Wirecard.

Lufthansa, which traces its roots back almost a century, employs around 138,000 people and owns brands, including Eurowings and Austrian Airlines.

It has been brought to its knees by COVID-19 and what promises to be a protracted travel slump, and like many rivals across the world, sought state help to stay afloat. Even after Thursday’s gains, its shares are down almost 40 percent this year.

Also on Thursday, European Union regulators approved Lufthansa’s €6 billion recapitalization, part of the bailout deal, subject to a ban on dividends, share buybacks and some acquisitions until state support is repaid.

Concerned a government stake would make it harder for Lufthansa to make tough decisions about restructuring and job cuts, Thiele had instead proposed an indirect government holding in the airline via Germany’s KfW development bank.

That sparked fears the bailout would fail and Lufthansa would have to seek protection from creditors within days.

Thiele said that talks with the government on Monday had not removed his doubts: “Differences remain with government representatives,” he told the newspaper.


  • Billionaire Thiele drops objections to bailout.
  • Shareholders to vote on rescue plan at EGM.
  • Plan to see state take 20% stake in Lufthansa.
  • Cost-cutting deal struck with cabin crew union.

But he said he could not have voted for insolvency, even though his investment would continue to be at risk. He said he would continue to seek to influence the company’s development in the future, although declining to say how.

Thiele said it was in the interests of Lufthansa employees that management quickly negotiate restructuring with unions.

Up to 22,000 jobs could be at risk at the airline.

Lufthansa struck a deal overnight with the UFO union representing German cabin crew that is set to reap more than €500 million in savings, including steps to stop pay rises, cut working hours, and a cap on pension contributions.

Lufthansa said on Tuesday it had not yet reached a deal with services union Verdi. More talks are scheduled.

Saudi bourse’s 2020 net profit surged ahead of listing

Updated 24 June 2021

Saudi bourse’s 2020 net profit surged ahead of listing

  • Net profit rose 227 percent in 2020 from a year earlier

DUBAI: Saudi Tadawul Group, the owner and operator of the country’s stock market, said its net profit rose 227 percent in 2020 from a year earlier, while revenue more than doubled with a boost from trading commissions.
It posted a profit after zakat or Islamic tax of 500.5 million riyals ($133.5 million), it said in a statement.
Unlisted Tadawul gave a peak of its earnings ahead of a planned initial public offering later this year that will allow it to expand and strengthen its position globally.
Saudi Arabia’s stock exchange has converted itself into a holding company ahead of the listing.
Tadawul is the ninth largest exchange in the world in terms of market capitalization which stood at around $2.6 trillion, partly boosted by the listing oil giant Saudi Aramco in 2019.

Saudi Mobily and Zain mull towers listing

Updated 24 June 2021

Saudi Mobily and Zain mull towers listing

  • “Options include forming a consortium to buy phone towers owned by both parties
  • Another option is to operate the towers on behalf of the two companies through an intermediary

RIYADH: Etihad Etisalat Co. (Mobily) and Mobile Telecommunication Company Saudi Arabia (Zain KSA) are studying several options regarding Towers Co., including the possibility of listing as much as 30 percent in the Saudi market, CNBC Arabia reported, citing two banking sources.
Financial regulators in the Kingdom agreed to the merger earlier this year.
“There are several options on the table and consultants have been appointed to study the matter,” an investment banking source told CNBC Arabia.
“Options include forming a consortium to buy phone towers owned by both parties by acquiring a minority stake with Mobily and Zain enjoying majority stakes,” said the source.
“There is also an option to operate these towers on behalf of the two companies through an intermediary company with a rate of return (RoR) system,” he added.
Consultants have already been appointed to study the proposed offering, with discussions currently underway, another source said.
“The aim is to reach an appropriate choice about the matter at a time when the two companies are looking to maximize their returns from the assets of the towers activity after the merger, as those towers are estimated at more than 18,000 towers,” he said.
An alliance of companies outside Saudi Arabia may join local firms to acquire a stake in the new company, the banking source said.

Saudi Arabia’s Bank AlJazira to raise $500m via Islamic bond sale

Updated 24 June 2021

Saudi Arabia’s Bank AlJazira to raise $500m via Islamic bond sale

  • The sale is of Additional Tier 1 bonds, the riskiest debt a banks can issue
  • The sukuk will price in the range of 3.95 percent to 4.05 percent

DUBAI: Bank AlJazira is expected to raise $500 million on Thursday via an Islamic bond sale, a document showed on Thursday.
The bond or sukuk will price in the range of 3.95 percent to 4.05 percent, tighter than initial guidance of between 4.25 percent and 4.375 percent after the deal attracted more than $1 billion in orders, the document from one of the banks on the deal showed.
Alinma Investment Company, Aljazira Capital and JPMorgan are arranging the deal, which is expected to launch later on Thursday, the document, which was reviewed by Reuters, showed.
The deal is for Additional Tier 1 bonds, the riskiest debt instruments banks can issue, which are designed to be perpetual in nature but issuers can redeem or “call” them after a specified period. AlJazira’s sukuk will be non-callable for five years.
The deal was the latest in a series of international debt sales from the Gulf, as banks, companies and governments take advantage of low interest rates to bolster finances hit by last year’s oil price crash and the COVID-19 crisis.
Gulf banks and companies are expected to make up a clear majority of total issuance this year, a change for a region where sovereigns made up roughly half of all issuance last year and in 2019.
Several banks in the region have issued AT1 bonds this year to bolster their Tier 1 capital, including Kuwait Finance House selling $750 million AT1 Islamic bonds on Wednesday at 3.6 percent.

Sudan gold exchange to help bolster foreign-currency reserves

Updated 24 June 2021

Sudan gold exchange to help bolster foreign-currency reserves

  • Most Sudanese gold is smuggled out of the country
  • Exchange will initially offer spot trades only, with futures and options to come

RIYADH: The launch of a gold exchange in Sudan will help regulate trade in the yellow metal and eliminate the smuggling that has led to a scarcity of foreign currency in the country, the Financial Markets Authority (FMA) Director General, Shawgi Azmi said in an interview with Asharq.

In 2019, 127 tons of Sudanese gold was traded on foreign exchanges, while official statistics from the central bank showed that Sudanese production amounted to only 20 tons, he said.

Sudan is one of the largest African gold miners, producing between 70 and 120 tons annually, and as many as 5 million of its citizens involved in gold prospecting, Azmi said.

The gold exchange will start with the spot sales only, while other terms of trade, such as futures contracts and options, are expected to be introduced at a later stage.

Sudan’s prime minister is expected to agree soon to launch a commodities exchange focused on agricultural crops, while the FMA is researching a livestock exchange, Azmi said.

Dubai plastic waste-to-clothes startup looks to KSA

Updated 24 June 2021

Dubai plastic waste-to-clothes startup looks to KSA

  • The company converts plastic bottles — collected from schools, events and businesses across the city — into clothes
  • The UAE produces at least 10 million recyclable bottles per day

ABU DHABI: A Dubai company that makes clothing from plastic water bottles plans to expand in Saudi Arabia and Egypt after the pandemic forced a complete rethink of its business model.

DGrade was established by Kris Barber in 2010 to address the vast amount of plastic water bottles being produced in the UAE.

The company converts plastic bottles — collected from schools, events and businesses across the city — into clothes.

(DGrade website)

But when the pandemic closed schools across the country, DGrade was forced to rethink how it operates. It also provided the impetus for the company to consider moving into new regional markets.

The clothes-making process begins by putting the plastic through hot and cold washing until it turns into flakes.

“Once we have the flakes, they’re then put through an extrusion process and turned into a fiber,” Emma Barber, managing director of DGrade, told Arab News. Its plant takes about 150,000 bottles per hour and 75 million bottles per month, she added.

Dubai British School event. (Dgrade Website)

Before the pandemic, the team used to collect plastics from schools and events around Dubai, Barber said. But with the closure of schools and a ban on events, DGrade was faced with a potential halt in its raw material.

Despite the closures, it still managed to collect 1 million bottles in the 2019-2020 school year.

“A lot of children have been collecting plastics at home, bringing them to schools and dropping them off,” Barber said.

Simply Bottles Al Mamzar Clean-up, November 2018. (DGrade website)

“We’re planning to expand in Saudi Arabia because of the huge population and also the amount of plastic.”

She said Egypt is also attractive because of its huge population, plastic waste issues and an already well-established textiles sector.

DGrade also plans to import plastic from Gulf countries. It is coordinating with companies in Saudi Arabia, Kuwait and Qatar to bail plastic and bring it to the UAE, Barber added.

Simply Bottles Green Fair, ENOC head office. (DGrade website)

On financial support from the banks, she said: “We’ve been looking for some working capital in terms of bridging loans. It has been difficult because the banks are unable to give you that kind of money due to local legislation and restrictions.”

But she said DGrade will soon announce a second round of investment with a large European company that plans to take an equity share.

“Without the investment that we managed to obtain, it would’ve been almost impossible to fund what we’ve done so far on our own,” Barber added.

To expand the business further, she said it coordinated with some companies to place outdoor bins at private events, which are chargeable at 100 UAE dirhams ($27.23) per month, in order to collect as many bottles as possible.

“We’re talking to ministries, waste management companies and private sector organizations to see if we can place larger cages into residential and community areas so people can place plastic at their convenience,” she added.

Dubai Chamber Sustainability Network. (DGrade website)

Like many companies large and small, DGrade was forced to slash costs during the pandemic. It moved to a smaller office, reduced staff wages and made half of their team redundant, Barber said.

The UAE produces at least 10 million recyclable bottles per day and the output is 18 million kg per year of recycled flake, she added.

Multiple companies have switched back to bottled water and away from dispensers in order to keep their staff safe, she said.

DGrade targets uniform or work-wear companies across all sectors. It has developed 200 types of fabric, all from recycled polyester.

Expo 2020 Dubai T-shirts @Expo 2020 Winter Festival Sale, December 2019. (DGrade website)

“The traditional fashion industry is highly polluting and damaging to the environment,” said Barber. “Traditional fabrics, such as cotton, are highly water- and land-intensive. They also use pesticides and fertilizers.”

Every year, 100 billion garments are produced worldwide and 92 million tons become waste, according to a 2021 BBC Earth report.

DGrade’s aim is not to promote the use of plastic, but to ensure that when it is used it is being responsibly managed and recycled, Barber said.

“In 99 percent of cases, recyclable plastic is the greenest packaging option available. It’s far better for the environment to use plastic than glass, aluminum or paper,” she added.

DGrade’s process of converting plastic to clothes produces 55 percent fewer carbon emissions, and uses 20 percent less water (which it recycles and reuses) and 50 percent less energy, she said.