Rolls-Royce To Raise $6.5 Billion To Cope With COVID Cash Crunch

Rolls-Royce To Raise $6.5 Billion To Cope With COVID Cash Crunch

Via Reuters:

Rolls-Royce RR.L plans to raise a total of 5 billion pounds ($6.5 billion), including 2 billion from shareholders, to cope with a “worst case scenario” as the coronavirus travel crisis crushes the British engine maker’s cashflow.

Airlines pay Rolls based on how many hours its engines fly in their larger jets and worries over a long-haul travel slump have knocked more than 80% off its shares this year, reducing its market value to just 2.5 billion pounds.

Rolls, whose engines power the Boeing 787 and Airbus 350, said in May it would cut 9,000 jobs as a result of the pandemic and its finances have come under intense scrutiny, which its chief executive said should end with Thursday’s plan.

“This is a comprehensive package which will take any liquidity questions off the table through this crisis,” CEO Warren East told reporters on a call.

“We wanted this package to provide sufficient headroom even through our worst case scenario,” East said.

A rights issue has been mooted as an option since July, but East said Rolls had to first demonstrate its restructuring plan was working before it could tap shareholders.

“We couldn’t really have done this much quicker,” he said.

Worries about its finances have prompted speculation of a government bailout of Rolls, which was nationalised in 1971 and later privatised.

But Chief Financial Officer Stephen Daintith dismissed this, saying: “That’s not part of any of our plans”.

Britain’s best known engineering firm is a key supplier to the country’s military programmes, invests heavily in research and development and helps sustain smaller suppliers.

Rolls shares were down 8% to 119.6 pence at 0936 GMT, their lowest level since 2004, after it said that it would raise about 2 billion pounds through a 10 for 3 discounted

his was fully underwritten at 32 pence per share, it said, a 41% discount to the theoretical ex-rights price, which analysts calculated at 54.6 pence.

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