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Lufthansa (LHAGR; Baa3, BBB-, BBB-; S) ITA deal set for approval

TRANSPORTATION
  • Analyst have had mixed takes on if they liked the airline taking a €325m/41% stake into Italy's ITA Airways but headlines below are pointing to it finally getting the clear from EU regulators. BS is squared away on net 1.8x including €8.3b in cash on hand.
  • Moody's, when it uplifted it into IG earlier this year, was relatively sanguine; "although the acquisition is initially dilutive to Lufthansa's profitability, we expect synergy realization as of 2025 and limited integration risks".
  • New 30s are flat today, we don't see value in its curve (or any network carriers). €1b in maturities this year and another €1.5b next year could see it revisit primary soon.
  • New Finnair 29s is the only cheap view we have in airlines. It's drifted away from us since (+200 priced vs. 213 now). Single carrier/country risk balanced by government ownership/uplift. For reference the Finish government is rated Aa1/AA+ which is +1/+2 notches higher than France.

BBG piece & initial ITA deal

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