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(Alliance News) - Jet engine maker Rolls-Royce Holdings PLC on Monday said it is evaluating the "merits" of raising GBP2.5 billion via a share issue to "enhance balance sheet resilience and strength".
The London-based company, in response to media reports, said: "We continue to review all funding options to enhance balance sheet resilience and strength. Amongst other options, we are evaluating the merits of raising equity of up to GBP2.5 billion, through a variety of structures including a rights issue and potentially other forms of equity issuance. Our review also includes new debt issuance."
"No final decisions have been taken as to whether or when to proceed with any of these options or as to the precise amount that may be raised," Rolls-Royce added.
The Financial Times, citing three people with direct knowledge of the matter, had reported on Sunday that Rolls-Royce was in talks with sovereign wealth funds, including Singapore's GIC, to raise GBP2.5 billion in October.
Shares in Rolls-Royce were trading 10% lower at 162.05 pence each in London on Monday morning, one of the worst performers in the FTSE 100 index. Year-to-date, the stock has shed more than 75% in value.
Rolls-Royce has been battered by the coronavirus pandemic as the grounding of passenger jets has meant significantly lower flying hours. This has hurt the company's revenue as airlines pay based on how much they use the engines, the trademark Rolls-Royce "power-by-the-hour" scheme.
In a bid to stay afloat following the collapse in global aircraft demand, Rolls-Royce has undertaken an aggressive restructuring that involves axing 9,000 jobs. In August, the company confirmed plans to shut its aerospace factory in Nottinghamshire and potentially to combine sites in Lancashire.
It also plans to close its site in Annesley by the end of 2022 in a move impacting around 120 staff, though the company is hoping most will transfer to its base in Derby.
A further 350 jobs are under threat as it revealed plans to stop making wide chord fan blades for new engines at its Bankfield site in Barnoldswick, Lancashire, by autumn 2023. It will shift the work to its Singapore site.
Rolls-Royce started the second half of 2020 with liquidity of GBP6.1 billion, comprising of GBP4.2 billion in cash at June 30 and a GBP1.9 billion undrawn revolving credit facility. In addition, the engineering company finalised a GBP2 billion undrawn term loan, partly backed by the UK Export Finance, in August.
The ongoing business restructuring, in particular Civil Aerospace business, is forecast to generate savings of GBP1.3 billion by the end of 2022. In addition, potential disposals are expected to generate GBP2 billion over the next 18 months, including of ITP Aero.
ITP Aero was founded by Rolls-Royce and Spain's Sener group in order to develop the EJ200 engine for the Eurofighter Typhoon fighter jet.
By Tapan Panchal; tapanpanchal@alliancenews.com
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