S&P lowers Lufthansa hybrid

S&P said it lowered its rating on Deutsche Lufthansa AG’s junior subordinated notes maturing in 2075 to CC from CCC+.

The other ratings on Lufthansa, including the BB- long-term issuer credit ratings and BB- issue rating on the company's senior unsecured debt, are unchanged.

The downgrade follows Lufthansa's announcement on May 19 that it will suspend coupon payments on the instrument until the drawn silent participations are repaid and the shares held by the government over the Economic Stabilization Fund are sold, the agency said.

“We understand that Lufthansa's decision to suspend the coupon payments is based on the E.U. Commission's view that these payments constituted a violation of the state aid regulations of the E.U. Temporary Framework, under which the €9 billion state aid package was provided to Lufthansa last year, and not an unwillingness or inability to pay. The potential nonpayment on the hybrid does not affect our other ratings on the company,” S&P said in a press release.

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