Rolls Royce to raise £2 billion in fresh equity in bid to boost balance sheet

ROLLS ROYCE today set out plans to raise £2 billion from a rights issue, a move the City has been predicting for some time.

The engine maker, led by CEO Warren East since 2015, wants to boost its balance sheet as it seeks to deal with the impact of the pandemic on its trade.

The company is under particular pressure since more than £3 billion of its debt is due for refinancing next year.

In addition to the equity raise, there will be a £1 billion bond offering and new bank loans of another £1 billion.

East said: “The capital raise announced today improves our resilience to navigate the current uncertain operating environment. By raising additional capital now, we will improve our liquidity headroom and reduce our level of balance sheet leverage, while supporting disciplined execution and investment to ensure we maximise value from our existing capabilities.”

The rights issue will be a 10 for 3 deal at 32p a share That;s a deep discount to the price of 130p at which the stock was trading yesterday.

In a trading update, Rolls said there has been “no material change” to its outlook since half year results in late August.

The rights issue is underwritten by a host of banks including BNP Paribas, Citigroup, Goldman Sachs and HSBC.

The move may reduce some of the pressure on the board from investors. According to The Times today, one shareholders think the company has “not been decisive enough”.

At least two big investors, Sandar Asset Management and Alliance Bernstein, have take short positions in Rolls Royce stock.