Rolls- Royce to raise billions to bolster its balance sheet
ROLLS- ROYCE HAS unveiled a £ 2bn investor cash call as part of a wider £ 5bn plan to bolster its balance sheet in the face of the coronavirus crisis.
The engine maker announced the rights issue alongside a bond sale to raise at least a further £ 1bn and another £ 2bn in loan support.
The firm said the fundraising will help it to weather wider economic risks from the pandemic, which has hammered the aerospace industry.
It comes on top of a major restructuring announced by RollsRoyce in May that will see it axe at least 9,000 jobs globally in response to the crisis – 3,000 of which will be in the UK. Around 4,800 roles had already gone by the end of August and 5,000 or more will go by January, it said.
Last month, the company slid to a £ 5.4bn half- year loss as it was battered by the downturn in air travel.
In a brief update on trading, it said revenues and underlying earnings are materially lower for the first eight months of the year.
It is not expecting to return to strong cash generation until 2022.
On the fundraising move, the group said: “Having considered a number of different scenarios, and in particular a ‘ reasonable worst case’ scenario, we have determined that it is in the best interests of shareholders.”
Rolls- Royce warned in August that a worst- case scenario, including a second wave of Covid19, would be likely to force it to raise extra cash and confirmed earlier this month it was considering a rights issue among other options to boost its finances.
It is understood the firm ditched talks about a £ 500m fundraising with sovereign wealth funds in Kuwait and Singapore due to unease among institutional shareholders that it would dilute their holdings in the firm.
Warren East, chief executive of Rolls- Royce, said: “The sudden and material effect of the Covid19 pandemic has had a significant impact on the commercial aviation industry, resulting in a sharp deterioration in the financial performance of our civil aerospace business and, to a lesser extent, our power systems business.
“We are undertaking decisive and transformative action to fundamentally restructure our operations, materially reduce our cost base and improve our financial position. The capital raise announced today improves our resilience to navigate the current uncertain operating environment.”