World News – GB – Rolls-Royce to raise billions in Covid-Lifeline


Rolls-Royce has announced that it will seek to raise billions of pounds to strengthen its finances after a « sharp deterioration » in civil aerospace due to the pandemic

Aircraft engine maker to seek to raise £ 2 billion from shareholders via rights issue

Rolls-Royce will also raise funds by issuing new debt, while rights issue may unlock additional funding

Rights issue could trigger additional £ 1bn loan from UK Export Finance, government trade finance body Rolls-Royce has already borrowed £ 2bn from the state

But Rolls-Royce said an extension of a government loan depended on both UK Export Finance and HM Treasury approving the terms of the rights issue « So there is no guarantee that this increase will take place, » he said

The government holds a ‘golden share’ in Rolls-Royce which prevents the company – which is considered to be of strategic interest to the UK – from coming under foreign control

There had been rumors that Rolls-Royce had been in talks with sovereign wealth funds in Singapore and Kuwait to invest in the company

The company also said it has secured commitments for a new two-year £ 1bn loan facility and plans to issue bonds to raise an additional £ 1bn

Warren East, CEO of Rolls-Royce, said: « The capital increase announced today improves our resilience to navigate the current uncertain operating environment

« The sudden and significant effect of the Covid-19 pandemic has had a significant impact on the commercial aviation industry, leading to a sharp deterioration in the financial performance of our civil aerospace business and, to a lesser extent measurement, of our supply systems Company « 

After flirting with the investment arms of the governments of Kuwait and Singapore, Rolls-Royce has turned to its existing shareholders to find the money it needs to survive the pandemic

He makes money not by selling engines, but from the payments airlines make when those engines fly Flight hours have halved since the start of the pandemic, and Rolls-Royce – and everyone – not sure when they will return to pre-coronavirus levels

If the rights issue is successful – and it’s fully underwritten by the city’s banks, and presented at a steep discount to the current market price of Roll-Royce shares – it will unlock £ 3 billion additional loans The £ 5bn recapitalization should be enough, the company says, to see it through most forecasts of another coronavirus spike

There is an element of government support here for what is one of the UK’s top exporters. One third of new loans will be guaranteed by UK Export Finance, a branch of government – although Rolls-Royce warns that support is conditional on the issue of rights and on continuing negotiations with the Treasury

The big question now is whether Rolls-Royce has done enough The evolution of the virus is difficult to predict, as is the future behavior of air travelers even if it is defeated Shareholders who are urged to rack up the liquidity would like to have some certainty – and this is lacking

As part of the rights issue, investors will receive 10 shares for every three they own at a price of 32 pence – a steep reduction from its share price on September 30 which closed at 130 pence

Rolls-Rolls has already announced the cut of 9,000 jobs in a bid to cut costs and plans to sell part of its business to raise £ 2 billion

While the engineering group also designs and manufactures products such as engines and turbines for the defense, marine, and oil and gas industries, civil aerospace is by far its biggest business and represents 51% of its income

It uses a ‘horsepower per hour’ model, which means Rolls-Royce makes money every time an aircraft using one of its engines is flown, making around £ 4bn per year

« Lower demand for new aircraft is hardly in sight, » said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown

But she said her financing plans should give Rolls-Royce « a lot more leeway to help it weather the Covid crisis »

SNP MP Margaret Ferrier is suspended by her party after admitting she traveled to and from Westminster

Rolls-Royce share price

World news – UK – Rolls-Royce to raise billions in Covid-lifeline



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