Rolls-royce will on thursday unveil plans to raise 2bn from investors as part of measures to bolster its balance sheet and buy the uk aerospace manufacturer financial headroom to weather the impact of the coronavirus pandemic on its business.
People with direct knowledge of the plans told the financial times that the company was set to go ahead with the planned equity raise without the participation of sovereign wealth funds including singapores gic, which had been in talks with the company in recent weeks.
Two of the people said existing shareholders resisted the dilution that would have resulted from new investors such as sovereign wealth funds.
In addition to the equity raise, rolls-royce plans to refinance some of its existing debts and is expected to announce new facilities, these people said. some 3.2bn of the companys debt falls due next year, putting it under pressure to refinance those borrowings.
Shares in rolls-royce have fallen 81 per cent to 130p since the start of the year, giving the uk business a market capitalisation of just 2.5bn and highlighting the extreme level of concern among investors about the viability of its business.
Rolls-royce declined to comment. in recent weeks, the company has responded to reports over the possibility of an equity raise and other measures by saying that it had ample liquidity to see it through the end of 2021.
However, the resurgence of concerns over the spread of the coronavirus continues to cast a cloud over the aerospace sector and in particular, the long-haul segment where rolls-royce specialises. the long-haul market is expected to recover much later than short haul and regional travel.
The large aircraft powered by rolls-royce engines are being retired at a record rate and new orders have collapsed. this has not only hit sales but also the services from which the company makes most of its profit.
The companys debt was also downgraded to junk earlier this year. moody's, the credit rating agency, last week further downgraded rolls-royce debt to ba3 from ba2 amid concerns of a worsening outlook for aviation and the number of hours its engines are likely to fly.
Sky news earlier reported that sovereign funds would not be involved in the deals.