<By DOUG CAMERON Deutsche Lufthansa AG LHA.XE -2.50%launched a bond offering providing a potential exit from its investment in JetBlue Airways Corp., JBLU -4.21%though it said it won't cut its ties with the U.S. carrier.
Lufthansa said it had no plans to divest its 15.7% stake in JetBlue, describing its €234 million ($311 million) offering of bonds convertible into JetBlue shares as an attractive way to strengthen Lufthansa's balance sheet.
The relationship between the two airlines has come into question as Lufthansa becomes more reliant on a trans-Atlantic joint venture with United Continental Holdings Inc., UAL +2.06%while JetBlue has expanded ties with many of the German carrier's rivals. Lufthansa also has been shedding airline assets as part of efforts to cut costs and battle rising fuel prices.
While Lufthansa is JetBlue's largest shareholder and a member of the Star alliance, the U.S. carrier has forged ties with members of other marketing alliances, notably Oneworld member American Airlines, a unit of AMR Corp.
Lufthansa Chief Executive Christoph Franz said last year that the "strategic importance" of JetBlue had diminished since Lufthansa acquired an initial 19% stake for $300 million in January 2009, particularly as it deepened ties with fellow Star member United Continental.
Lufthansa paid $7.27 a share for its initial stake. In 4 p.m. Nasdaq trading Thursday, JetBlue shares were down 4.2% at $5.
JetBlue declined to comment on Lufthansa's bond issue, which was priced Thursday.
JetBlue Chief Executive Dave Barger has said in the past that the airline can coexist with multiple partners because of what he terms an "open architecture" business model.
The German company, which retains two JetBlue board seats, is offering the bonds, due in 2017, via its unit Lufthansa Malta Blues LP.
The five-year notes will be exchangeable into 46.7 million shares in JetBlue, though the airline has an option to redeem the bonds in cash instead. They have a coupon of 0.75% per annum, payable annually and an initial exchange price of €5.02 per JetBlue share.
Lufthansa, Europe's biggest carrier by passengers flown, is in the process of selling its loss-making U.K. airline British Midland Ltd., known as bmi, to International Consolidated Airlines Group SA, IAG.LN +0.22%the parent of British Airways and Iberia.
Richard Branson, chairman of Virgin Atlantic Airways Ltd., on Thursday called on European regulators to block the bmi sale on competition grounds.
Printed in The Wall Street Journal, page B7 A version of this article appeared Mar. 30, 2012, on page B7 in some U.S. editions of The Wall Street Journal, with the headline: Lufthansa Offers Debt Based on JetBlue Stake.
Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved>
an initial exchange price of €5.02 per JetBlue share
That's about US$6.65 share
Amazing how 30MM shares traded today (highest in over 1 yr) and Luft didn't sell any shares and MAY convert in 5 yrs. They retain their 15.7% stake and are still down over $100MM in about 3 yrs while JetBlue has been one of the better and most consistent earners in the US.